Advance Auto Parts Inc. (NYSE:AAP) said on Thursday that tariff refunds contributed $26 million to its second-quarter gross margin, providing boost to the year-over-year margin change.
$26 Million Refund Leads To Margin Boost
During the earnings call, Advance Auto Parts’ CFO Ryan Grimsland confirmed that “Tariff refunds contributed $26 million in gross margin, accounting for 130 basis points of year-over-year change,” he said.
Shane O’Kelly, the CEO of Advance Auto Parts, said that excluding the International Emergency Economic Powers Act (IEEPA) refunds, the company “generated a gross margin of approximately 45% for the first half of 2026.” The company’s adjusted operating margin for the second quarter was 5.6%.
New SKUs, Locations
The company also added thousands of new products, or Stock Keeping Units (SKUs), to its catalog. “Halfway through this year, we have added approximately 80,000 new SKUs to our assortment catalog, building upon the 100,000 new SKUs we introduced last year,” O’Kelly said.
He also said that the company was “strengthening relationships with existing vendors,” as well as adding new vendors to introduce new products to its catalog. The company was also “identifying opportunities” to improve its margins.
O’Kelly also said that the company was consolidating its Distribution Centers from nearly 40 down to 15, with a “unified warehouse system” that helped “enhance asset productivity” throughout the supply chain.
“We also launched market hubs that improve same-day parts availability for our customers,” O’Kelly said, adding that areas with the market hubs performed better. “Year to date, we have opened five market hubs, bringing the total to 38 locations,” he outlined.
“We now plan to open 15-20 market hub locations this year and remain on track to achieve our goal of operating 60 locations by mid-2027,” the CEO said.
Advance Auto Parts Earnings
The company reported revenue of $2 billion for the quarter, missing analyst estimates of $2.04 billion, but its adjusted EPS of $1.03 per share exceeded market expectations and remained above analysts’ estimate of 81 cents per share. The company was cash flow positive with $120 million YTD, compared to a cash outflow of $201 million last year.
The company said it expected capex to be around $300 million, “allocated to new stores and greenfield market hub growth, store infrastructure upgrades, and strategic investments,” according to Grimsland. The company reported a gross profit of $924 million.
Price Action: AAP shares were up 0.52% to $42.64 during pre-market trading on Thursday, after declining 24.55% to $42.39 at market close on Wednesday.
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