Should You Hold Advance Auto Parts Stock? Here's What the Numbers Show

Advance Auto Parts (AAP) just hit some important milestones that could reshape its future. The company wrapped up store optimization in March 2025 and now 75% of locations sit in markets where they rank #1 or #2 by density. The playbook looks solid: 100+ new stores planned over two years, supply chain consolidation cutting SG&A expenses (Q3 adjusted operating income hit $90M, up 370 basis points YoY), and a refreshed operating model launching this quarter to boost labor efficiency.

Here’s the catch though—the balance sheet is stretched. Long-term debt jumped from $1.8B (Dec 2024) to $3.4B (Oct 2025), giving them a debt-to-capital ratio of 0.61 vs the auto sector average of 0.18. That’s a lot of leverage to carry while ramping capex from $181M to $250M in 2025. DIY segment pressure from consumer financial strain is another headwind.

But the margin math is compelling: they’re guiding 2.4-2.6% adjusted operating margin for 2025 (vs losses in 2024) and targeting 7% by 2027. Management’s betting on supply chain efficiency and the professional accounts channel to offset DIY weakness.

The verdict? It’s a hold. The operational turnaround is real, but you’re essentially betting that debt gets managed and new stores move the needle before consumer pressure tightens further. Watch Q4 earnings for execution proof.