어드밴스 오토 파츠(AAP) 2026년 2분기 실적 발표 컨퍼런스 콜: 마진 확대, 가이던스 재확인

핵심 요약

• 어드밴스 오토 파츠는 2026 회계연도 2분기 순매출이 20억 달러를 기록했으며, 동일매출은 소폭 감소했다고 발표했습니다. 정비업소(Pro) 부문의 한 자릿수 초반 성장세는 DIY(개인 정비) 부문의 한 자릿수 초반 매출 감소로 상쇄되었습니다.
• 조정 영업이익은 1억 1,200만 달러로 순매출의 5.6%를 기록했습니다. 국제긴급경제권한법(IEEPA) 관세 환급금을 제외한 조정 영업이익률은 4.3%로, 전년 동기 대비 130bp 가까이 상승했습니다.
• 조정 희석 주당순이익(EPS)은 전년 동기의 0.69달러에서 1.03달러로 증가했습니다. 연초 대비 누적 잉여현금흐름은 전년 동기의 2억 1,000만 달러 유출에서 1억 2,000만 달러 유입으로 개선되었습니다.
• 경영진은 연간 순매출 약 85억 달러, 동일매출 증가율 1%~2%, 조정 영업이익률 3.8%~4.5%, 잉여현금흐름 약 1억 달러의 기존 전망치를 재확인했습니다.
• 연간 조정 희석 EPS 가이던스는 예상 이자수익 증가를 반영하여 2.60달러~3.30달러로 상향 조정되었으나, 약간 높아진 세율 전망으로 인해 상승 폭이 일부 상쇄되었습니다.
• 회사는 중기 조정 영업이익률 목표인 7%에 계속 집중하고 있으며, 공식적인 2027년 가이던스는 발표하지 않았으나 2027년에 최소 100bp의 이익률 확대를 목표로 유지하고 있다고 밝혔습니다.

주요 재무 데이터

사업 및 영업 실적

Pro 동일매출은 한 자릿수 초반의 성장률을 기록했습니다. 메인 스트리트 Pro는 거래량 증가, 부품 수급 개선, 40분 미만의 일관된 배송 시간에 힘입어 전체 Pro 성과를 200bp 이상 상회했습니다. 경영진은 대형 법인 고객(National Account)의 부담이 하반기에는 상반기의 절반 수준으로 줄어들 것으로 예상했습니다.

가계 예산 압박으로 재량 지출이 줄고 대규모 정비 프로젝트가 연기됨에 따라 DIY 매출은 한 자릿수 초반의 감소율을 보였습니다. 한여름 날씨가 예년보다 완화되면서 냉각, 공조, 케미컬 및 오일 제품군 매출도 타격을 입었습니다. 경영진은 소비 압박, 정비 연기, 재량 지출 감소 및 날씨 영향이 합쳐져 동일매출에 약 100~150bp의 역풍으로 작용했다고 추산했습니다.

동일 SKU 가격 인상분 약 4%를 포함해 건당 평균 구매액이 증가했습니다. 거래당 구매 수량은 1년 및 2년 전 대비 모두 증가했으나, 전체 거래량 감소로 인해 이러한 개선 효과가 상쇄되었습니다. DIY 수요는 필터, 엔진오일, 배터리 부문에서 상대적으로 강세를 보인 반면, 핵심 하드웨어 부품 카테고리는 부진했습니다.

상품화(Merchandising) 전략 추진으로 연초 대비 누적 제품 이익률이 약 100bp 확대되었습니다. 어드밴스 오토 파츠는 지난해 10만 개의 SKU를 추가한 데 이어, 올해 상반기에도 카탈로그에 약 8만 개의 SKU를 추가했습니다. 또한 회사는 연말까지 새로운 DIY 및 Pro 가격 책정 체계의 도입을 완료할 것으로 예상하고 있습니다.

물류센터 통합이 완료되어 미국 내 약 40개였던 물류센터 네트워크가 단일 창고 시스템 기반으로 운영되는 15개 시설로 축소되었습니다. 회사는 파악된 물류센터 프로세스 개선 작업의 25%를 완료했으며, 나머지 개선 작업은 2027년 중반까지 구현될 것으로 예상하고 있습니다.

실적 발표 시점 기준으로 어드밴스 오토 파츠는 38개의 마켓 허브를 보유하고 있었습니다. 경영진은 3분기 9개를 포함해 2026 회계연도에 15~20개의 허브를 신규 개설할 계획이며, 2027년 중반까지 60개를 운영한다는 목표를 차질 없이 추진 중입니다. 운송업체 계약 재입찰을 통해 운송업체 수를 70% 줄이고 수천만 달러의 비용 절감을 달성할 것으로 예상되며, 경영진은 이 비용 절감이 2027년 이익률 확대에 기여할 것으로 기대하고 있습니다.

매장 서비스 지표도 개선되었습니다. 순고객추천지수(NPS)는 전년 동기의 60점대 후반에서 80점에 가깝게 상승했고, 연계 판매율은 20%대 중후반에서 30%에 가깝게 증가했으며, 2분기 내내 평균 Pro 배송 시간은 40분 미만을 유지했습니다.

경영진 가이던스

경영진은 동일매출 전망이 지속적인 Pro 부문의 강세, 기저효과, 고객 참여 이니셔티브, 약 3%의 동일 SKU 인플레이션에 힘입어 거래량이 2분기 수준에서 회복될 것이라는 기대를 전제로 한 것이라고 밝혔습니다. 3분기 첫 4주간의 추세는 거래량 개선과 2년 기준 성장 가속화에 힘입어 2분기 마지막 몇 주보다 소폭 앞섰습니다.

하반기 매출총이익률은 계절성과 매출 구성의 영향으로 3분기가 4분기보다 높은 44%~45%를 기록할 것으로 경영진은 전망했습니다. 하반기 조정 영업이익률은 3%~4%로 예상됩니다. 53번째 주가 없다는 점은 4분기 영업이익률에 약 20bp의 부정적 영향을 미칠 것으로 추산됩니다.

리스크 및 주요 관전 포인트

• 저소득층 및 중소득층 DIY 고객에 대한 지속적인 경제적 압박은 거래량을 제한하고 저가 제품으로 수요를 이동시킬 수 있습니다.
• 화물 운송비, 연료비, 배송비 증가가 하반기에도 이익률에 대한 부정적 요인으로 작용할 것으로 예상됩니다.
• DIY 물량이 예상보다 부진함에 따라 Pro 비중이 높아져 2분기 매출총이익률에 약 20bp의 하락 압력으로 작용했습니다.
• 경영진은 하반기 동안 추가적인 유의미한 관세 환급금 유입은 없을 것으로 보고 있습니다.
• 특히 엔진오일 및 석유 관련 제품을 중심으로 한 원자재 가격 상승은 가계 예산에 추가적인 부담을 줄 수 있습니다.
• 연간 동일매출 전망을 달성하기 위해서는 2분기 기말 실적 대비 거래량 추세의 개선이 전제되어야 합니다.

애널리스트 Q&A 주요 내용

메인 스트리트 Pro 성장: 경영진은 이러한 성장이 기존 고객의 주문 증가와 기존에 침투율이 낮았던 거래처들이 어드밴스 오토 파츠로 거래를 전환하기 시작한 결과라고 밝혔습니다. '최우선 거래처(first call)' 지위를 확보하기 위해서는 즉각적인 고객 전환보다는 수주에 걸친 지속적인 영업 활동이 일반적으로 필요합니다.

마켓 허브 수익성: 신규 입지(Greenfield) 허브는 일반적으로 더 나은 소매 요충지에 위치하고 더 많은 추가 부품 재고를 확보할 수 있기 때문에 기존 매장을 전환한 시설보다 약간 더 나은 실적을 내고 있습니다. 경영진은 마켓 허브를 Pro 및 DIY 고객 모두를 위한 성장 동력으로 보고 있습니다.

하반기 매출 가정: 경영진은 DIY 부문이 계속 압박을 받는 동안 Pro 부문이 우수한 성과를 이어갈 것으로 예상합니다. 회사는 어드밴스 리워드(Advance Rewards), 유료 검색 최적화, 타깃 프로모션, 등급별 제품 구성(good-better-best), 자체 브랜드(PB) '아르고스(Argos)' 라인업 확장을 통해 가격 경쟁력을 강조하고 있습니다.

2027년 이익률 개선 기회: 경영진은 상세한 2027년 가이던스를 제시하지는 않았으나, 2027년에 최소 100bp의 이익률 확대를 달성하겠다는 목표를 유지했습니다. 물류센터 생산성 향상, 운송비 절감, 매장 인력 최적화, 상품화 개선 등이 주요 동인으로 예상됩니다.

재무제표 관리 우선순위: 어드밴스 오토 파츠는 2분기 중 2028년 만기 선순위 채권 약 3,000만 달러를 매입했습니다. 경영진은 향후 채권 매입이 잉여현금과 경제적 유인에 따라 결정될 것이며, 자본 배분의 최우선 순위는 여전히 사업 재투자라고 밝혔습니다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Welcome to the Advance Auto Parts Second Quarter 2026 Earnings Conference Call. I would now like to turn it over to Lavesh Hemnani, Vice President, Investor Relations.

질의응답

Michael Baker

Good morning, and thank you for participating in today's call. I'm joined by Shane O’Kelly, President and Chief Executive Officer; and Ryan Grimsland, Executive Vice President and Chief Financial Officer. During today's call, we will be referencing slides which have been posted to our Investor Relations website. Before we begin, please be advised that management's remarks today will contain forward-looking statements.

All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements regarding initiatives, plans, projections, goals, guidance, and expectations for the future. Actual results could differ materially from those projected or implied by the forward-looking statements. Additional information can be found under forward-looking statements in our earnings release and risk factors in our most recent Form 10-K and subsequent filings made with the SEC. Shane will begin today's call with an update on the business and products on our strategic priorities for 2026.

Later, Ryan will discuss results for the second quarter and provide an update on the guidance for full year 2026. Following management's prepared remarks, we will open the line for questions. Now let me turn over the call to our CEO, Shane O’Kelly. Shane?

Shane OKelly

Thank you, Lavish, and good morning, everyone. I would like to start by expressing my appreciation for our frontline team for their hard work and dedication to serving our customers. During the second quarter, the team navigated a volatile demand environment, which contributed to a slight decline in comparable sales. This included low single-digit sales growth in the Pro channel, which performed in line with our expectations. Within Pro, the Main Street business continued to outpace overall growth supporting share gains in that segment. .

In the DIY channel, sales declined more than we anticipated, particularly during the last 4 weeks as tighter household budgets weighed on consumer spending during the quarter. Against this backdrop, the Advanced team continued to prioritize actions across our strategic initiatives, which contributed to solid profitability in Q2 with an adjusted operating margin of 5.6%. Excluding the benefit of IEEPA refunds received in the quarter, adjusted operating income margin expanded by nearly 130 basis points to 4.3%.

We maintained focus on executing actions within our control, which has translated to sequential improvement in core operational KPIs, including NPS, time to serve and attachment rates. The second is an inflection point for advance with the return to positive free cash flow as we generated $120 million year-to-date compared to an outflow of cash during the last 2 years. During the quarter, we also repurchased approximately $30 million of outstanding debt, which along with improved profitability supported further deleveraging of the balance sheet while we continue to allocate more capital to investments to grow the business.

Based on our first half performance and updated projections for the remainder of the year, we are reaffirming our full year sales, operating margin and free cash flow guidance. This includes comparable sales growth in the 1% to 2% range, which considers continued spending pressure in the DIY channel offset by ongoing strength in the Pro channel along with higher same-SKU inflation due to increased commodity costs.

We are also implementing a focused action plan aimed at strengthening execution across our operational KPIs and driving higher customer engagement to deliver better transaction performance in the second half compared to trends during Q2. Our margin outlook balances the tailwind from recent tariff refunds with incremental headwinds stemming from shifts in channel mix and increased commodity costs. We will continue to prior to the efforts to make progress on our strategic objectives as we work to create long-term value for our shareholders.

Let's turn to an update on our strategic priorities for 2026. Our strategy remains unchanged and is built on 3 pillars: merchandising, supply chain and store operations, supported by targeted initiatives to drive sustainable, profitable growth over the long term. We remain committed to executing actions under our 2026 strategic priorities as we make progress in our journey towards a medium-term 7% adjusted operating margin target.

Let's begin with merchandising. We are focused on ensuring reliable product availability to enhance customer service and drive growth in unit sales per transaction. Our new assortment framework launched last year is helping us increase the breadth of products we carry in each store and broadening availability across our network of DCs, hubs and stores.

Halfway through this year, we have added approximately 80,000 new SKUs to our German catalog building upon the 100,000 new SKUs we introduced last year. Through comprehensive category reviews, we are strengthening relationships with existing vendors and identifying opportunities to improve margins while also partnering with new vendors to further expand our selection of parts.

In the near term, our merchandising team is refining communication within the DIY channel to enhance brand awareness and deliver value-driven offerings aimed at increasing customer engagement. We are collaborating with vendors on targeted media campaigns, leveraging advanced rewards, providing store incentives and optimizing online paid search to stimulate transaction growth and improve conversion in stores.

Moving to an update regarding our pricing and permissions management initiatives. We are on schedule to complete the full deployment of a new pricing framework for both DIY and Pro segments by year-end. Our pricing philosophy remains unchanged. We aim to offer everyday competitive prices and operate rationally in the market. The new framework is expected to enhance visibility of competitive pricing actions and enables the execution of precise market-based pricing strategies.

The early results from the Pro channel have shown an increase in team member and customer confidence, which we expect to support efforts to grow share among main street Pros. Alongside the implementation of more sophisticated pricing models we are also improving discipline around the management of store-based promotional activities. We expect to offer everyday competitive prices, along with seasonally relevant promotions and plan to deploy marketing dollars on offers that yield and improvement in sales or profitability.

On a year-to-date basis, our merchandising initiatives have contributed approximately 100 basis points to product margin expansion. We anticipate building upon this growth in the second half of the year to support our margin in movement goals for the year.

Turning to supply chain. In the second quarter, we completed our distribution center consolidation. This initiative commenced more than 2 years ago when we operated nearly 40 DCs across the United States, utilizing multiple warehouse management systems. As of today, we operate 15 DCs supported by a unified warehouse system, marking a key milestone in our efforts to enhance asset productivity throughout our supply chain.

Along with consolidating our DC network, we also launched market hubs that improved same-day parts availability for our customers. Areas equipped with market hub locations consistently outperformed those without market hubs, which reaffirms the strategic value of these locations. Year-to-date, we have opened 5 market hubs, bringing the total to 38 locations. Our real estate team has done a great job in expanding our capabilities, and I am pleased to share that we are accelerating the pace of market hub openings for this year.

We now plan to open 15 to 20 market hub locations this year and remain on track to achieve our goal of operating 60 locations by mid-2027. Regarding DC productivity, our team is concentrating on key process improvements aimed at streamlining and standardizing operations within our distribution centers. We anticipate that these actions will yield greater operational efficiency and facilitate improved product flow into and out of the DCs. During the second quarter, we completed 25% of the identified process improvements and remain on track to systematically implement the remaining process changes by mid-2027.

These actions are aimed at increasing labor productivity within our DCs and provide visibility into cost reductions per unit shipped is expected to contribute to margin expansion starting next year.

Our strategy is focused on minimizing redundant product handling, improving shipment accuracy, reducing inventory lead times and transitioning to a more variable cost structure. For example, we have now standardized the DC receiving process across our facilities, eliminating a significant number of variations, which is expected to deliver better productivity through higher processing volumes per labor hour.

Another critical component of supply chain productivity is transversion optimization. We are currently rebidding all of our carrier contracts, and we expect to consolidate our volume with 70% fewer carriers. This initiative is expected to generate tens of millions of dollars in cost savings, which will support margin expansion in 2027. Collectively, the DC process changes and transportation additives are expected to enhance our ability to operate a more scalable supply chain. Next, I will conclude with an update on our third strategic pillar, store operations.

In our stores, we are holding teams accountable for service execution and measuring the effectiveness of our initiatives through clearly identified KPIs as we strive to increase labor utilization. The second quarter provided further evidence of progress on our store-based initiatives. NPS or Net Promoter Scores have improved nearly 80 points from the high 60-point range in the same period last year. which suggests that our service enhancements are resonating with customers. In-store attachment rates have improved to nearly 30% in from the mid high 20% range in the same period last year, which contributes to unit share gains and average time to deliver pro orders consistently back below 40 minutes during each week in Q2, which is improving reliability for our Pro customers.

In addition to measuring progress through these KPIs, we are also identifying opportunities to better prioritize store tasks investing in technology to drive operational efficiencies and enhancing training content to further elevate customer service. These actions will help us strengthen execution across our primary KPIs in the near term while our store and merchandising teams partner to drive higher customer engagement and improve conversion in the second half of the year.

During the second quarter, we also completed an independent evaluation of store task execution with the objective of updating our store labor standards that were previously unchanged for over a decade. This activity follows the rollout of our store operating model last year, which determined the allocation of resources such as trucks and drivers based on market demand factors.

The study examined time allocated to routine store responsibilities, including picking or stocking products, receiving shipments from distribution centers and assisting customers with product installations such as batteries and wipers. We expect to use the findings to identify that deliver the highest value to our customers and simultaneously highlight nonvalue-added activities that can be reduced to enhance productivity.

The next phase of this initiative involves updating our labor allocation systems to align with the newly developed labor standards. We anticipate beginning this implementation later this year, which will enable us to further improve NPS and drive productivity in the years to come.

To conclude, I want to reiterate that our strategic plan is unchanged. Our KPIs are improving, and we have returned to positive free cash flow. We are cognizant of the external macro pressures impacting consumer spending in the near term. We are implementing a focused action plan to support the business in the second half while we actively manage the execution of our strategic initiatives throughout the year.

I will now hand the call over to Ryan to discuss our Q2 financial performance. Ryan?

Ryan Grimsland

Thank you, Shane, and good morning, everyone. I want to begin by thanking our frontline associates for their commitment to serving our customers. For the second quarter, we reported net sales of $2 billion with a slight decline in comparable sales. The Pro channel delivered low single-digit growth, which was in line with our expectations. The strength in Pro was more than offset by a decline in DIY sales in the low single-digit range as constrained household budgets impacted spending during the quarter.

We also experienced milder summer weather in several of our markets, which drove an underperformance in weather-sensitive categories, such as cooling and climate control and fluids and chemicals. In our view, the combination of a larger than anticipated deceleration in DIY spending with deferral in large ticket projects, a reduction in discretionary spending compared to last year and weather-related drivers during Q2 accounted for approximately 100 to 150 basis points of comp headwind in the quarter.

Turning to the cadence of sales. During the first 8 weeks of Q2, comparable sales grew by approximately 1%, including a low single-digit growth in Pro and flattish DIY sales. In the final 4 weeks, comp growth moderated in both channels as we cycle through difficult comparisons from last year. Also this time frame coincided with price changes to reflect movements in commodity costs, which further stretch consumer budgets.

In this period, the Pro channel delivered positive comparable sales growth, but DIY volumes slowed further, driving most of the shortfall in sales for the quarter. For the quarter, average ticket was positive and included same SKU inflation of approximately 4%. The sequential step-up in inflation from approximately 3% last quarter was driven by market-related price adjustments and increases in commodity costs, which impacted motor oil and other petroleum products.

Our team remains committed to enhancing customer service, and these efforts continue to support growth in units per transaction, which grew on both a 1- and 2-year basis, helping partially offset lower transaction volumes.

Diving deeper into category performance. Within DIY, sales were stronger in maintenance and failure categories, such as filters, motor oil and batteries, while hard parts categories lagged, likely indicating selective spending behavior and deferral of larger projects. On the other hand, in the pro channel, our hard parts business, including brakes and undercar continue to outperform, supported by an improvement in parts availability and consistency in delivery times.

We maintained our strategic focus on growing share across Main Street Pros, which represents the largest portion of our addressable market. The Pro team carried the momentum from Q1 and with transaction performance for this segment outpacing the overall enterprise. The Main Street Pro comp exceeded our total Pro comp by more than 200 basis points, helping offset the headwind created by the optimization of national accounts.

Moving to margins. Adjusted gross profit was $924 million or 46.2% of net sales, resulting in approximately 240 basis points of gross margin expansion in Q2 compared to the same period last year. Tariff refunds contributed $26 million in gross margin, accounting for 130 basis points of year-over-year change. The balance 110 basis points of margin expansion was primarily driven by an improvement in product margin and included 2 incremental cost drivers in the quarter. First, a channel mix shift due to the slowdown in DIY sales resulted in a headwind of approximately 20 basis points. Second, supply chain expenses, including higher freight and fuel costs drove approximately 20 basis points of deleverage due to the lower-than-expected sales volume.

These headwinds were offset by approximately 40 basis points of tailwind from immaterial LIFO and warehousing expenses in the quarter, compared to a headwind in the same period last year. Excluding the benefit of the IEEPA refunds, we generated a gross margin of approximately 45% for the first half of 2026, highlighting the progress across our merchandising strategies.

Shifting to expenses. Adjusted SG&A was $812 million or 40.6% of net sales, driving 15 basis points of leverage compared to last year. Expenses were down approximately 1% year-over-year, reflecting our focus on labor productivity through simplification of store tasks and management of resource allocation along with reinvestment of savings from indirect spend optimization.

Adjusted operating income came in at $112 million or 5.6% of net sales, resulting in approximately 260 basis points of year-over-year margin expansion. Adjusted diluted earnings per share was $1.03 compared to $0.69 during the second quarter last year. We generated $120 million of free cash flow year-to-date, marking a significant improvement from an outflow of $201 million last year. The improvement in free cash flow was driven by improved profitability and working capital management, a reduction in cash expenses related to our store optimization activity last year and the receipt of tariff refunds.

Our balance sheet continues to be in a solid position as we ended the quarter with a cash balance of approximately $3.1 billion. During the quarter, we utilized approximately $30 million of cash to repurchase a portion of our 2028 senior notes. And we ended the quarter with a net debt leverage of 2.1x compared to 2.4x last quarter, which is in line with our targeted range of 2.0 to 2.5x. We remain committed to repaying debt at or before maturity.

Turning to full year guidance. Let's start with net sales. For the full year, net sales are projected at approximately $8.5 billion, including comparable sales growth in the 1% to 2% range. Based on product cost inflation experienced during Q2, we now expect full year same SKU inflation of approximately 3% and implying second half inflation of approximately 3%, consistent with the first half of 2026. The step down in inflation compared to the second quarter reflects the comparison against last year's tariff-driven price adjustments.

Based on revised inflation expectations, along with our focused action plan to increase customer engagement, range of comparable sales growth guidance assumes a recovery in transaction volumes compared to the second quarter. Regarding Q3, trends during the first 4 weeks of the quarter are tracking slightly ahead of trends in the final weeks of Q2 and have accelerated on a 2-year basis.

As a reminder, these first 4 weeks of Q3 represent our most difficult comparisons last year. And our comparisons begin to ease significantly over the next 8 weeks. Moving to margins, we have reaffirmed full year adjusted upteen 3.8% to 4.5%, resulting in 130 to 200 basis points of year-over-year margin expansion. We expect full year gross margin to expand in the range of 110 to 150 basis points to approximately 45%. Most of this margin expansion is expected to be driven by the merchandising initiatives related to strategic vendor sourcing and optimization of pricing and promotions. We expect that the benefits from these merchandising initiatives to be partially offset by investments in supply chain productivity.

As I discussed earlier, we had some moving items within gross margin in Q2. These items have also been factored into our full year guidance. During the second quarter, we received substantially all the AEP refund claims by us. These refunds equate to approximately 30 basis points of gross margin contribution for the full year. However, this benefit is being fully offset by the from changes in sales mix compared to our prior forecast and the incremental impact of higher shipping, freight and fuel costs in the supply chain.

We will continue to work closely with our vendor partners to navigate the Alvin geopolitical landscape to mitigate potential supply or cost pressure. Regarding SG&A, we expect reported full year expenses to be down year-over-year, contributing between 20 to 50 basis points of leverage. This is largely due to cycling of approximately $90 million in nonrecurring expenses from 2025. Adjusting for these expenses, we expect SG&A to grow at a low single-digit rate compared to last year.

We expect to deploy savings generated from better in-store task management, effective resource allocation and a reduction in indirect spending to fund general wage inflation, new store and market hub opening expenses and strategic labor investments in priority markets. As we move forward, we will continue to look for opportunities to streamline tasking operations in stores to dedicate more time to serving customers.

Moving to other item guidance. We have raised adjusted diluted EPS guidance to a range of $2.60 to $3.30. The revised EPS outlook includes approximately $100 million of interest income, which is an increase of $20 million compared to our previous expectations based on trends through Q2. We continue to plan for pretax interest expense of approximately $210 million for the full year. The recent debt repurchase does not have a material impact on guidance. The benefit of higher interest income is being partially offset by a slight increase in tax expectations for the year.

Shifting to cash flow. We continue to expect 2026 capital expenditures of approximately $300 million, with spending allocated to new stores and greenfield market hub growth, store infrastructure upgrades and strategic investments. scheduled for this year. Our revised guidance includes 30 to 35 new store openings this year with 6 stores opened in the first half of 2026. For market hubs, our guidance now assumes 15 to 20 market hubs this year, which exceeds our prior expectations. We opened 5 market hubs in the first half of 2026 and currently plan to open 9 market hubs during Q3. We are reaffirming our full year free cash flow guidance of approximately $100 million.

Our guidance includes a flow-through of tariff refunds received during the second quarter and time for certain general operating expenses planned for the balance of the year. The change in free cash flow trend compared to our year-to-date trend of $120 million does not reflect any change in underlying operational progress of the business.

To conclude, I want to thank our frontline associates for the continued improvement in the quality of service provided to our customers. Their efforts are supporting improved conversion, NPS and attachment rates while our protein continues to drive share gains across the Main Street Pro.

I will now hand the call back to Shane.

Shane OKelly

Thank you, Ryan. I'd like to close by thanking the Advanced team for staying focused on elevating our customer experience and driving operational productivity, which we believe will position us well to create long-term value for our shareholders. Thank you. Operator, we can now open the line for questions.

Operator

[Operator Instructions] Your first question comes from the line of Steve Forbes from Guggenheim Securities.

Steven Forbes

Brian, Shane, I wanted to maybe dig to customer segmentation and whether you're seeing transaction growth among your largest up and down the street customers. And maybe any comments you can provide that help book conviction around sort of sustainable transaction comp into the out year here as you reap the benefits of the strategic priorities.

Shane OKelly

Yes. Steve, thank you for the question. And let me just begin by thanking our team. Important to recognize what they're doing each and every day. So great question. Let's unpack Pro. Think about it in terms of Main Street and think about it in terms of national accounts. We are excited by what we're seeing with Main Street. So the growth there, 200 basis points above what we're seeing in total Pro, and that's inclusive of transactions.

What we're doing with Main Street, we're getting real traction. And think about this as in the trenches, seeing a local shop at somebody with 2 or 3 bays and that's where both our connectivity, our reputation and really the quality of what our -- both our outside and inside Al's team members can do is being a difference.

Know that inside our Pro numbers, we have national account headwinds. And Ryan can unpack the numbers a little bit, but the way I think about it is we're starting to lap that. And remember, this is us saying hey, where do we want to be in the Pro segment? Where do we have a right to win? Where is our profitability more attractive? All of that points to Main Street. So national accounts waning, and we're starting to see that diminish over time. So given the success we've had with Main Street given how we're situated to compete with Main Street. We feel good about that both in what you've seen here and what we think we can do for the future.

Ryan Grimsland

Yes, Steve, I'll add a couple of things. Well, just think about the main -- I'll hit on the Main Street and the national accounts. The national account pressure will be about half of what it was in the first half in the second half. So we are starting to lap there will still be some pressure there, but it will be about half of what we've seen in the first half of the year. So that will help a little bit on the trends there.

On the Main Street Pro, we're not just seeing accounts that we've had for a while, continue to shop with us, buy more transactions, we're seeing accounts on Main Street that hadn't shopped much with us before, start to give us some of their business. And that's a good sign that our assortment is getting there, the service level is improving.

A couple of things to note on live that we're making the right moves here. By the end of the year, 70% of our stores will have a market hub, and we're bringing more parts closer to the customer. and that allows us to reach other main street pros and provide a better level of service to them. So we're excited about the market hub acceleration we're able to do here. We still think by the middle of next year, all stores will be in a market hub being able to accelerate a few more in this year.

By the way, we're going to open up 9 in Q3. So that acceleration is going to be impactful, bringing more parts closer to the customer. The other thing is our assortment work that we're doing, and we still have opportunity to improve that assortment for the Pro customer, make sure we got the right coverage, but the work we have done is starting to resonate. We're going to continue to do that. We see opportunity to continue to improve that coverage and be more relevant for our Pro customers.

Shane OKelly

A couple of just last additions and then look forward to your follow-up. If you look at how we played in the Pro space over the years, we have a TechNet program, which has been very successful and included in that is a warranty program. So you say, Steve, you own a small shop somewhere and you fix their car and the customer drives 3 states away and needs to get that original work repaired. They could do that through an unrelated shop through our warranty program and get that paid for.

We have programs like MotoVisuals, MotoLogic that help break down what's going on in vehicles, our credit programs, our tools and equipment programs our ability to work with your account as you grow. And so there's a number of things that we do with Main Street I'm going to use the word that's specialized or even bespoke relative to what else is out there that helps our level of attractiveness and build that partnership.

Most recently, and this is just sort of coming out now with Anthony Solanas and our Pro team is owning the mile where he's using both our CRM software, the partnership between the outside sales team member, which is called CAM and our insight sales team members to CPP to really focus on customers who are geographically proximate to our stores.

Now on the plus side, our aggregate total time to serve is under 40 minutes. And we think that's a key threshold. But now you think about focusing on customers that are very close to the store, and I'm thinking 1, 2, 3 miles, we'll be well under 40 minutes there, and that's a further point of differentiation. So look for us to continue to do that. But net-net, we feel good about what we can do with Main Street Pro.

Steven Forbes

I appreciate that. And maybe just a quick follow-up, given the commentary around hub growth. I know the transition here was the greenfield growth, I believe, this year over repurpose footage right of the distribution footprint. So can you talk about how those greenfield hubs are performing relative to the original cohort of hubs that were more repurpose footage. And if that sort of performance sort of supports the acceleration that you're referencing here into the back half?

Ryan Grimsland

Yes. I'll jump in here and Shane can add color. But the greenfield market hubs, the actual store because there's a store within the market out, they actually are performing a little bit better than the other one. And I'll give you just a background on the other ones. The non-greenfield were actually conversions of old, we call them blue but Carquest DC smaller DCs that we converted, they weren't necessarily in prime retail locations. But they did service the market.

They do service the mark or part. So the hub runs help the market. The greenfield ones tend to be in a better retail location area where we can get more retail sales out of that hub as well. So from a volume standpoint, they tend to do a little bit better on the greenfield side than the conversions just because of the nature of the retail business we generate from them. And also, the conversions those still supplied some parts of the market through what we call PDQ.

So there was still some service level. It wasn't as strong or as efficient as the mark hubs are. So when we put a greenfield in place, that is a lot of parts going to that market that weren't there before. So they tend to perform a little bit better than the conversions.

Shane OKelly

I just add that the market hub paradigm for us is a key part of how we're going to grow, not just with Pro, but with DIY. And so we're accelerating what we're doing there. And as Ryan touched on, we'll open 9 in Q3. We're sitting at 38 currently. We want to be at 50 by the end of the year. As a reminder, think about these as having 70,000, 80,000 SKUs, sometimes a little bit more. being able to get parts same day to a radius of stores in 50-plus stores.

So that really changes our ability to compete for parts that people want that day. And so we're going to continue it. We're going to refine it, and we'll talk more about what we'll do as we get to the 50 going forward.

Operator

Your next question comes from the line of Simeon Gutman from Morgan Stanley.

Simeon Gutman

So this may be a slight repeat from the prior question. I missed some of the prepared remarks. But thinking about the core driver of do-it-for-me, if there's temporal pressure in the economy, like gas prices, I would expect DIY to be more sensitive, not DIFM. So can you talk about the trajectory you're on with core DIFM improvements? And how much of this quarter was more macro or it could be like strategy just taking some time to take hold.

Shane OKelly

Yes, I'll talk about Q2 and then the Q3 trend. So the deceleration we saw in our P7 the last period of the months we were running about flattish on Day and low single-digit positive Pro for the first 8 weeks. We saw really DIY decelerate towards the end of the quarter. That was really the bulk of the lower performance of what we expected. DIFM, while slight deceleration was still positive during that time period. I think it was more just a reflection of a little bit of macro pressure there. But the Pro was still positive in the quarter and in the final 4 weeks still positive. .

Those -- the momentum in Pro has continued into Q3. We like what we're seeing there. On the DIY side, we've seen a little bit of an acceleration from the trend we saw in -- and on a 2-year basis, we've seen some good acceleration. More importantly, on the trends in Q3, we're seeing transaction growth improve. So the transaction -- transactions have improved versus our Q2 trend where we exited Q2. So some positive things there that give us confidence in our guide for the rest of the year.

Simeon Gutman

And then a quick follow-up. And again, I apologize if you said this already, but merchandising success or excellence, I forget the terminology for some of the gross margin initiatives. I guess ex tariffs, if I got this right, the margin may have come in a little bit, I guess, worse than we expected. I don't know if that's right or wrong. Some of that, I assume, was deleverage of distribution expense? Or was there any slowdown in just the merchandising success strategy during the quarter? .

Ryan Grimsland

Actually, good question. I mean the rate was impacted a little bit by mix here. So you got about 20 basis points of mix impact from DIY, the lower volumes that we anticipated. And then you had about 20 basis points, it's fuel surcharge, just things that were flowing through. So those are really the 2 that impacted us that drove it down. It still was like a 44.9%, so close to the 45%. So able to manage close to 45% the merchandising initiatives still cost out really strong and provided great value for us. I mean, 110 basis points year-over-year if you back out the tariff impact on margins. So the real slight decrease versus our expectation in the quarter was driven by fuel supply chain expenses in the channel mix. .

Operator

Your next question comes from the line of Steven Zaccone from Citi.

Steven Zaccone

I want to follow up on the second half here. So clearly, the decision to reiterate the same-store sales guidance, it does look like the second quarter still missed expectations. So maybe just help us understand some of the phenomenons that can help in the back half. The lost sales due to weather, do you expect them to come back? And then any help on the third quarter versus the fourth quarter because it seems like you got some work to do and the compares get a bit tougher in the second half of the year. .

Shane OKelly

Stephen, it's Shane. I'll start and then Ryan can unpack it further. So just big picture. We catered to the lower and mid-tier consumers. And you see this not just in our numbers, but I think you see it broadly in our market and others. That's been a very stressed consumer. And so from a macro perspective, they've struggled. They've struggled as fuel prices have risen, and those budgets have continued to get tighter as they've gone through.

And you saw that, by the way, in our Q2. And if you look at the last 4 weeks of our Q2, we were probably a little slower pivoting to value given that the consumer said, "Hey, this is what's really important to me. So as we look at Q3 and Q4, we're taking a series of actions to be more attractive and to maintain and improve conversion for those consumers as they come and visit us.

So here's what's going on with that. So we've got our Advanced Rewards program. That's been recently launched. We'll continue to reach out to that cohort of customers. We're doing work with paid search optimization to make sure both in terms of what keywords we're using, what geography of customers talking to and how we get them in there. We're going to continue to promote our good parts campaign.

We're simplifying tasks inside of stores and communications so that when a customer does come in, that experience is as positive as it can be. And by the way, I've seen an uptick in feedback that I personally get from customers about what they're seeing in our stores. We know that value is are important. We've got Argos, which is our private brand of oil, and we're now expanding across a broader line of products that we think will be attractive.

We also know that and this is a good part of what we do from an assortment perspective is good, better and best. And so in the past, when the consumer is healthier, they'll say, "Hey, tell me more about the better and the best", now they want to learn a little bit more about tell me about the better or tell me about the good. We've got those products in. So that speaks to what we're doing on conversion. That speaks on what we're doing with units per transaction. So we have a series of activities geared towards rekindling what's going on with the DIY customer to do as well as we can. On the Pro side, you heard some of that with how we respond to Steve's earlier comments, but we really like what we're doing with Main Street Pro. We're going to continue to push in there.

Ryan Grimsland

Yes. And Steven, I'll just be a little specific around what's driving the back half comp performance expectations. So all that Shane talked about, we think, will help with that. And we're actually seeing on a 2-year basis, that accelerated a little bit. And you mentioned difficult compares in the back half. The real difficult compare is, it tends to ease as we go throughout the back half of the year. One thing also to note is we had about 50 basis points of impact last year in Q4 due to product transitions. We won't be cycling that in Q4 this year. .

It was related to First brand groups and other product transitions in our front room that had an impact last year. We won't have that this year. So that's kind of a tailwind cycle over, but we're focused on Pro. Pro will continue to outperform. We're seeing those trends continue and that will be a driver. We still think there will be DIY channel pressure more than we originally thought, even though trends have improved after the last 4 weeks of the quarter into Q3, we still are expecting that DIY will be pressured in the back half. But to Shane's point, we think we have a really compelling value offering within our product set and our categories.

We have good, better, best. And that Argos expansion couldn't -- to other categories couldn't come out of time, I think, for the consumer. It's a good value offering across many different categories now. I think our efforts to increase customer engagement will be good. One other thing to note in the back half, we've got a 3% inflation expectation, that's really due to kind of the commodity price oil prices that are going in. That's about 100 basis points higher than we originally planned.

Steven Zaccone

I appreciate all that detail. My follow-up is the prior commentary, 7% operating target on a medium-term basis, I think next year, 27% was expected to at least 100 basis points of expansion. Do you still think that's a reasonable target in light of some of these weaker DIY trends and maybe cost inflation across the business?

Shane OKelly

Yes. I mean we're still focused on 7% of medium-term target. The 100 basis points next year, that's where we're at today, which is a little too premature to give specific guidance for next year. But I'll tell you what Ryan is doing in supply chain because the bulk of this year is supply chain planning, driving improvements, understanding the timing of benefits we'll get from supply chain and also our store optimization work and what we're doing there. And both Ron and Tony have been digging in. What Ryan is doing, he's about 25% of the way through really looking at the productivity in different areas.

Think of our receiving capabilities, our inbound or outbound, and that team has been hard at work. It's giving us more confidence in the value unlock in supply chain. We're not ready to necessarily give what that guidance will be for next year, still working through the planning, but the work he's uncovered year-to-date. It's just continuing to confirm for us that there's opportunity there. So we're still 100 basis points for next year still makes sense for us, but we're not ready to give more specific guidance.

Ryan Grimsland

And let me build. I think 7% is that right target. We're in a very complicated geopolitical situation that's impacting the concert. So the consumers stressed but think a little bit longer term, I think we're going to be permanent in this state of affairs. If you think longer term, the backdrop of the industry that we're in remains very attractive. So think about that in terms of number of vehicles on the road. Think about that in terms of how old they are.

Think about that in terms of what the penetration of electric vehicles has been or now a prevalence of a hybrid vehicle that has an engine. Think about that in terms of miles driven. Think about that in terms of cost of a new car. People -- new cars are pushing $50,000. People are keeping their cars longer and want to fix them. Think about the total TAM. It's a $160 billion market. It's fragmented.

So the idea that all of those backdrop fundamentals for the longer term, just think beyond the immediate pressing concerns of the consumer. Those are all good things for us as we compete in the market. And so that's why keeping that target the same is appropriate.

Operator

Your next question comes from the line of Bret Jordan from Jefferies.

Bret Jordan

How should we think about working capital, I guess, accounts payable to inventory and what your factoring costs are looking like now that your leverage ratio has come down a little bit.

Shane OKelly

Yes. Well, our coverage actually improved a little bit. I think -- we would expect that to continue to improve over the medium, long term here. We are making some investments, obviously, in working capital related to our assortment work, but we're also finding productivity. So overall, we'll see improvement in our working capital. We'll see improvement in our coverage. We have great conversations with vendors to work through that, but that's going to be over the medium term. But we did see -- we have seen improvement in our coverage ratio.

Obviously, the banks versus -- with our vendors, they obviously provide rates to them. We don't get involved in that, but we know they've kind of stabilized for sure. There's -- obviously, the external rate so far has been under pressure as well. But it has stabilized since we put in the transaction last year. And so -- what I've heard anecdotally is just that the difference is starting to converge, but it's, I think, about where it's been for a while stabilizing a really volatile rate environment. which is good for our vendors. They want stability.

I think one of the key points that happened in Q2 was rating agencies, both Moody's and S&P, stabilized our outlook, which is just a demonstration of the improved balance sheet that we have. It's in a solid position. The free cash flow returning to positive free cash flow. That's the first time in 2 years. this company has gone to a positive free cash flow.

So I think from a balance sheet standpoint, improving supply chain finance, very stable. The banks are supportive of the program. I think the transaction really helps bridge us to investment grade.

Bret Jordan

And then on the commercial business, ex the national account cutbacks, are you gaining share, if you think of retaining share of the up and down the street business, I mean, sort of adjusting for same-SKU inflation and looking at that 200 basis point comp ahead of Pro. Do you think that's a share gain indicator or just holding share?

Ryan Grimsland

I think it's a hole and then potentially in some markets, again, is how I think about it. A lot of noise going on as we transition the mix of the national accounts to the Main Street, but as I -- personally, when I visit accounts, the consensus on improving time to serve, improving the assortment thinking about what we're doing with TechNet and other promotions, I think, gives us confidence about what we're doing going forward.

Shane OKelly

Yes. The Main Street, Brett, larger addressable TAM, I mean you know this, but we're really excited about larger transactions there for us. So the transactions are stronger for us in the main street. So I think maybe it's a hold in gain in certain areas. We're excited about what we're doing on the Main Street Pro. .

Operator

Your next question comes from the line of Maksim Rakhlenko from TD Cowen.

Maksim Rakhlenko

Great. So first, can you just help bridge gross margin for both 3Q and 4Q, the key puts and takes that we should be considering, and then just any help triangulating to final outcomes compared to 2Q? .

Shane OKelly

Yes, absolutely. A couple of things. You think about the -- the back half of the year, we are expecting -- it does include headwinds from higher freight fuel costs, some channel mix headwinds. So DIY coming down, you'll have a little bit of a mix pressure on we still expect elevated freight and fuel costs that will be in our margins.

Looking at kind of Q2 is our guidepost or operating income. These cost items drove approximately 30 to 40 basis points of headwind One thing to keep in mind, we are cycling a 53rd week. So in Q4 operating margins, that's approximately 20 basis points of headwind in the Q4 operating margins. So EBIT margin guide for the second half is 3% to 4%, with the high end, consistent with last year, excluding the 53rd week.

The gross margin specifically, we're assuming a margin range of 44% to 45% and with Q3 higher than Q4, just due to seasonality and the mix that we sell, we don't expect any material tariff refunds inflows coming in the back half of the year. So just a thought on that. on SG&A, if you're thinking about operating income and the flow-through there. We expect those dollars to be relatively flat to last year in Q3, including more store openings, the decline in Q4 year-over-year is really due to that extra week. So that extra week of SG&A. So in general, it will be -- exclude that at a low single-digit increase.

Maksim Rakhlenko

And then so you guys repurchased a little bit of debt this quarter for the first time in a while. If you remain on track to hit your guide for this year, should we see further repurchases ahead? And then will it be a similar magnitude or potentially those step up? And then just bigger picture, can you update us on conversations with the rating agencies, and any sort of goalpost that we should consider as you will get back to investment grade?

Shane OKelly

Yes. So a couple of things on that. We're always going to be opportunistic with excess cash that we can't deploy or don't feel like we can deploy into the business. So the way our capital priorities go, we're going to deploy cash into the business to continue to drive this come back, improve the business operations.

When we have excess cash beyond that, if we find economic benefits to retiring debt before maturity, we'll deploy it towards that. We have no plans at this time, but we're always looking at the market, so we'll look to do that at or before maturity is our plan. And if we have excess cash that we're confident in, we'll do that. But again, I'm excited about the fact that, this is the first time in a long time, we've been able to use excess cash.

And our cash balance continuing to be a positive for us on the bunch sheet. We've got $3.1 billion of cash, we are an excess cash position relative to our obligation. So if we can deploy that to the business, we will, if not, we'll continue to deploy and delever the balance sheet.

As far as the rating agencies are concerned, we've had very constructive dialogue. We're excited about the stable outlook. Just a reminder, to get to investment grade with Moody's about 3 jumps, and S&P, it's 2 jumps. So this is a journey that we're on. It's been positive conversations. I think the free cash flow -- returning to positive free cash flow beginning to delever the balance sheet are all good indicators that I hope they will see as positives. But we have dialogue with them regularly. We're working towards getting back to investment grade, but it is a little bit of a journey.

Operator

Your next question comes from the line of Kate McShane from Goldman Sachs.

Mark Jordan

This is Mark Jordan on for Kate McShane. As you think about your focus on Main Street customers, is there a way to quantify how much of that AFM comp is coming right now from existing customers? How much is coming from new customers? And I guess, if we think about the time it takes to win a new account, is there a lag or what is the lag between opening new market hub and maybe signing up a new Pro account?

Shane OKelly

Yes, good question. On the plus side, most customers know who we are, and we will commonly get some sort of business from them within the Pro world, there's a hierarchy where you want to be first call. You want to be the guy that the customer says, "Hey, I'm ordering auto parts today and advance is going to be the first call. And by the way, the questions that go around how you earn that is, do you have the part, yes or no? When can I get it, time to serve. And then sometimes, hey, what's my cost going to be? .

And so as we improve in each of those areas, our ability to get first call customers or earn our way in the first call improves. And we haven't sort of unpacked that number specifically other than to say that we're very focused on it, and opening market hub certainly helps.

In my experience, when you go into somebody where you're not first call, it's not a question of, hey, I make 1 visit, and then the customer says, "Great, you're here, and so now I'm going to switch. So it usually takes a series of visits over a period of weeks, where you have to both demonstrate the value proposition and earn that right. And usually, it comes in the form of, okay, I'm going to give you guys this category, I'm going to give you this set of orders and then how do you perform and you earn your way in.

It's a trust-based business. It's a relationship-based business. And if I go back to some of the things that we talked about before, whether it's our TechNet program or the quality of our CAMS, our outside sales team member. We've got the right constituent parts to go to go make that happen. And now the market hubs become a further enabler of that. But it's not an immediate process, but we feel good in terms of where Main Street Pro sits today.

We feel good in terms of how we're migrating through some of our national account business, and we feel good about where we're going forward with our Own The Mile program our use of CRM, our value plays for our Pro customers. The quality of our inside sales team in our stores, our CPPs, our reputation, Advance, has long been known for being in the Pro universe.

Ryan Grimsland

And just to add, the mix between new and existing, it's a mix of both. We're seeing growth in both. .

Mark Jordan

And one follow-up, if I could. You mentioned the same-SKU inflation you're seeing on motor oil and other lubricants. Can you just talk about how your Argos line is positioned relative to the competitors there?

Shane OKelly

Yes. So we like the name. We like the people that we source the product from. We like the performance within -- in the category. Argos is actually our highest unit selling motor oil. And by the way, we represent very high-quality prominent brands, and by the way, proud to sell those as well. But as the consumer says, value is really important to me. they know the quality we put into the product, but the idea that it comes with affordability, reliability, sustainability, it really resonates with them and resonates with our team. And so it's an easy product for our store team members to sell.

Operator

Our final question comes from the line of Michael Lasser from UBS.

Michael Lasser

It seems like your guidance is basically saying, hey, at the low end, we could do a flat comp. And part of that is you're going to see more like-for-like inflation in the back half of the year, the comparisons get a little easier. But on the other hand, it does seem like the business is becoming more volatile. You had spoken about some volatility coming into the second quarter and some volatility coming out of the second quarter. So how does that influence your perspective on the back half said another way, was there any thought to lowering the comp outlook for the back half, just to be a little bit more conservative? .

Shane OKelly

Yes, I appreciate it, Michael. Just talk a little bit about the trends. When we entered into Q2, we did talk a little bit about the DIY slow down a little bit of pressure there, softness in, but even then the first 8 weeks was kind of in line with our expectations. We were tracking around a 1 comp for the first 8 weeks and DIY was roughly flat, Pro positive low single digits. It was really the last 4 weeks. And I think in that last 4 weeks, we had 1 unique weather impact in our areas. If you look at our store footprint, the average temperature was actually down year-over-year. That's one.

I think the DIY really pivoted the value. And I'd just say, I don't want to belabor this, but I think we were slower to pivot our messaging to that. I think we've got a great value offering, and we've pivoted going forward to make sure that the customer sees that but the last 4 weeks really was an indicator of the health of the business. I think I was -- when we see the trends coming in Q3, those Q3 trends have accelerated and more particularly in transactions, and from a 2-year basis, we are in line with what the guide would imply, which is roughly a 3% 2-year stack. And that's what we're expecting going forward. So we're not expecting a deviation from that kind of 2-year trend and where we're tracking today to be within our guidance range.

Michael Lasser

Sorry, Ryan. My follow-up question is on the path moving forward. You have articulated a lot of confidence that over time, there are idiosyncratic drivers to improve Advanced Auto Parts profitability especially from all the actions that have already been made. So are you still of the view that next year, there could be more margin expansion as the fruits of those initiatives take place. And if the overall environment for the aftermarket remains more challenging next year, to what degree does that potentially offset the idiosyncratic gains and profitability that you are expecting in 2027.

Ryan Grimsland

Yes, I appreciate it, Mike. I'll just talk about -- we talked about at least 100 basis points next year, and we still have confidence in that -- and a lot of the work that Ron has been doing because this year has been about supply chain stores, planning, getting into the hood and he's making his way through supply chain it's given us more confidence in the unlocking will have going forward. We're not ready yet to give specifics on that.

We'll update later in the year on that. But honestly, we're getting more confidence as Ryan is working through that. And then Tony, on the store side, we're seeing a shift in making sure that our labor hours are as productive as possible serving our customers. less tasking, focus on the customer, driving productivity there. We're seeing that and we're getting more confidence in the actions that we're going to be able to take there. So we're more confident.

I think 10 -- at least 100 basis points is still a target that we have for next year. You talked about if the current pressures, and it's really around DIY, maybe some freight pressures.

One, on the DIY of that persistent may be a little bit of pressure, and we saw that in Q2. We had 20 basis points of mix pressure. But yes, we still delivered our underlying margin growth of over 110 basis points if you exclude Arif. So the business is still driving operating income growth, gross margin growth even despite some of those headwinds in those trends. And expect that to continue. If that were to continue, we'd expect to be able to mitigate that next year.

Shane OKelly

Michael, it's Shane. Thanks for the questions. If I come back to the big picture and you're on the big picture, good industry. By the way, if you look at how we're running the business, we're willing to make the tough calls. We're using KPIs to track how we're doing. We're being transparent about it. We're being disciplined in the execution. We're not happy with how Q2 came out.

We're putting in a series of initiatives to help us as we think about what we can do with DIY and what we can sustain with Pro -- but even in the tough moments, you can point to and find evidence of improvements in areas that are critical for our continued advancement improvement for our turnaround for our comeback. And you can think about that in terms of NPS. That's -- we rolled that out.

And our initial numbers were rough. And we've talked about the journey from the 60s to the 80s. That's meaningful. That's a customer saying, "Hey, I had a better experience than what I had last time. When you think about things about attachment rate. And if you look at our market hub openings, look at what we're doing with the assortment, look at the DC consolidation.

We literally just finished the DC consolidation. So I don't want to say we're nascent in the journey because we've been at it for a minute, but we are making improvements and getting better every day on the things that we can control. And we're staying at it in terms of being rational actors and putting in plans to make that improvement continue in the future.

Operator

And that concludes our question-and-answer session. I will now turn the call back over to Shane O'Kelly for some closing remarks.

Shane OKelly

Thanks, everybody, for joining the call. I want to thank the team members at Advance. It's their hard work that's making the progress on some of the KPIs that I mentioned, and it's their hard work that's helping us as we go through Q3. We look forward to talking to everybody at the end of the quarter, and we appreciate you following the company. Take care. .

Operator

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.