Advance Auto Parts (AAP) Q2 2025 earnings summary

Executive summary

• Returned to profitability in Q2 2025, with sales and operating margin at the upper end of expectations, driven by Pro business growth and stabilization in DIY.

• Reaffirmed full-year 2025 sales, operating margin, and free cash flow guidance.

• Proactively reorganized debt capital structure, enhancing financial flexibility and supporting supply chain financing.

• Strategic initiatives and store optimization supported turnaround progress and long-term value creation.

• Completed all store closures under the 2024 Restructuring Plan in Q1 2025.

Financial highlights

• Q2 2025 net sales were $2.0 billion, down 7.7% year-over-year; comparable store sales increased 0.1%.

• Adjusted gross profit was $880 million (43.8% of sales), with gross margin expanding 16 basis points year-over-year; reported gross margin was 43.5%.

• Adjusted operating income was $61 million (3.0% margin), up 19–20 basis points year-over-year; reported operating income was $22 million (1.1% margin).

• Adjusted diluted EPS was $0.69, up from $0.62; reported diluted EPS was $0.25, down from $0.51.

• Free cash flow for the first half was an outflow of $201 million, including $20 million in store optimization costs.

Outlook and guidance

• Full-year 2025 net sales expected between $8.4–$8.6 billion; comparable store sales growth of 0.5%–1.5%.

• Adjusted operating income margin guidance of 2.0%–3.0%; Q3 margin expected above 4%.

• Adjusted diluted EPS guidance revised to $1.20–$2.20 due to higher interest expense from new debt.

• Free cash flow guidance between $(85) million and $(25) million, with capital expenditures around $300 million.

• 2027 targets: low single-digit comp sales growth, ~7% adjusted operating income margin, and net adjusted debt leverage of 2x–2.5x.