Advance Auto Parts’ Q2 results were met with a strongly negative market reaction, as management attributed the performance to continued margin pressures and a challenging operating environment. CEO Shane O’Kelly noted that while the Pro business showed positive comparable sales growth and DIY sales stabilized, the company is still in the early stages of its turnaround. O’Kelly highlighted, “We are closely monitoring consumer behavior and the potential for recalibration in purchasing habits, especially within our DIY business.” Management acknowledged ongoing operational challenges, including the impact of tariffs and higher costs, contributing to a cautious outlook for the remainder of the year.
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Advance Auto Parts (AAP) Q2 CY2025 Highlights:
- Revenue: $2.01 billion vs analyst estimates of $1.99 billion (7.7% year-on-year decline, 1% beat)
- Adjusted EPS: $0.69 vs analyst estimates of $0.58 (18.3% beat)
- Adjusted EBITDA: $118 million vs analyst estimates of $132.3 million (5.9% margin, 10.8% miss)
- The company reconfirmed its revenue guidance for the full year of $8.5 billion at the midpoint
- Management lowered its full-year Adjusted EPS guidance to $1.70 at the midpoint, a 15% decrease
- Operating Margin: 1.1%, down from 2.4% in the same quarter last year
- Locations: 4,292 at quarter end, down from 4,776 in the same quarter last year
- Same-Store Sales were flat year on year, in line with the same quarter last year
- Market Capitalization: $3.39 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Advance Auto Parts’s Q2 Earnings Call
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Bret Jordan (Jefferies) asked about expected cost savings from the new capital structure supporting supply chain financing. CFO Ryan Grimsland said benefits could emerge over time but are not embedded in current guidance, stressing the importance of regaining investment-grade status.
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Simeon Gutman (Morgan Stanley) questioned confidence in second-half comparable sales improvement. Grimsland cited easier year-over-year comparisons and incremental benefits from recent initiatives as primary drivers, but noted caution around DIY consumer elasticity.
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Michael Lasser (UBS) pressed for visibility on linear progress toward 2027 margin targets. CEO Shane O’Kelly and Grimsland explained that some initiatives offer more control than others, and timing of benefits may be nonlinear due to market and vendor dynamics.
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Christian Carlino (JPMorgan) asked about competitive responses to tariffs and prospects for share gains. Management described the current industry environment as rational, with competitors also raising prices and maintaining similar cost structures.
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Seth Sigman (Barclays) followed up on DIY transaction trends, which Grimsland said improved late in Q2 but remain pressured by inflation. He also highlighted ongoing training and loyalty efforts to support DIY stabilization.
Catalysts in Upcoming Quarters
In upcoming quarters, our analyst team will closely monitor (1) the pace at which tariff-related price increases are absorbed by DIY customers, (2) measurable improvements in gross margin and operating efficiency from supply chain and assortment initiatives, and (3) progress on store upgrades and market hub expansions. The trajectory of Pro segment growth and consumer behavior in response to inflation remain critical variables for ongoing performance.
Advance Auto Parts currently trades at $56.56, down from $61.81 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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