Aug 20, 2026 earnings call — Advance strategic progress and guidance
Management reaffirmed full year net sales guidance at approximately $8.5 billion and kept adjusted operating margin guidance between 3.8% and 4.5%.
Revenue $2.0B (est $2.0B) · EPS $1.03 (est $0.81)
Key quotes
"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."
"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."
Analyst Q&A 7
Main Street Pro growth
Q (Steven Forbes · Guggenheim): Are you seeing transaction growth from large national accounts and local Main Street customers, and is that growth sustainable as strategic priorities take effect?
A: Management said Main Street Pro is growing faster than total Pro, about 200 basis points ahead, and national account headwinds are diminishing. They plan to keep expanding market hubs and see Main Street as the right place to compete and be profitable.
"So the growth there, 200 basis points above what we're seeing in total Pro, and that's inclusive of transactions." — Shane OKelly
DIY vs DIFM and margin drivers
Q (Simeon Gutman · Morgan Stanley): Was the DIFM (do-it-for-me) performance driven by macro weakness or by strategy timing? And what drove the margin changes this quarter?
A: They said DIY decelerated late in the quarter while DIFM remained positive and Pro stayed positive; transactions improved into Q3. Margin rate was hurt a bit by channel mix and fuel supply costs, but merchandising initiatives still delivered strong underlying benefit when excluding tariffs.
"The merchandising initiatives still cost out really strong and provided great value for us." — Ryan Grimsland (CFO)
Back-half drivers and medium-term target
Q (Steven Zaccone · Citi): Will lost sales (weather) come back in H2, how do Q3 and Q4 compare, and do you still target 7% operating margin with 100 basis points next year?
A: They said they expect DIY pressure to persist but are taking value-focused actions and see Pro continuing to outperform; some Q4 comparisons are easier and they won't have last year's product transition headwind to cycle. Management remains committed to the 7% medium-term target and sees supply chain work giving confidence in future margin improvement, though specifics for next year are premature.
"We won't be cycling that in Q4 this year." — Ryan Grimsland (CFO)
Working capital and commercial share
Q (Bret Jordan · Jefferies): How should we think about working capital, payables, factoring costs now that leverage improved? And are you gaining or holding commercial share ex national accounts?
A: They said coverage ratios have improved and should keep improving over the medium term while making working capital investments for assortment; supply chain finance and vendor rates have stabilized and the company returned to positive free cash flow. On commercial share, they see holding share broadly and gaining in some markets, driven by better time-to-serve and assortment.
"The free cash flow returning to positive free cash flow. That's the first time in 2 years this company has gone to positive free cash flow." — Ryan Grimsland (CFO)
Gross margin outlook and debt use
Q (Maksim Rakhlenko · TD Cowen): Please bridge gross margin puts and takes for Q3 and Q4 versus Q2, and will you continue repurchasing debt and what are rating agency conversations?
A: They expect back-half headwinds from higher freight and fuel and some DIY mix pressure; gross margin assumed 44% to 45% with Q3 higher than Q4 and Q4 impacted by the 53rd week timing. On capital allocation, they will be opportunistic with excess cash to pay debt but will prioritize investing in the business; discussions with rating agencies are constructive and returning to positive free cash flow helps the journey toward investment grade.
"Gross margin specifically, we're assuming a margin range of 44% to 45% with Q3 higher than Q4 just due to seasonality and the mix that we sell." — Ryan Grimsland (CFO)
Winning new Pro accounts and ARGOS
Q (Mark Jordan · Goldman Sachs): How much of DIFM comp comes from new versus existing Pro customers and how long to win a new account after opening a market hub? Also, how is ARGOS positioned versus competitors?
A: They said winning first-call status usually takes multiple visits and weeks as you earn trust; growth is a mix of new and existing accounts and market hubs help but conversion is not immediate. ARGOS is positioned as a high-quality, value private brand and is already their highest unit-selling motor oil, making it easy for store teams to sell.
"ARGOS is actually our highest unit selling motor oil." — Shane OKelly
Conservative guidance and margin path
Q (Michael Lasser · UBS): Given recent volatility and the late-quarter softness, why not lower the comp outlook; and do you still expect margin expansion next year if the aftermarket stays challenging?
A: They said the late-quarter weakness was driven by unique weather and a slower pivot to value messaging, and that Q3 trends improved with transactions accelerating so their guidance remains appropriate. They remain confident in at least 100 basis points of margin expansion next year as supply chain and store productivity work progresses, though they will provide more specifics later.
"The last 4 weeks really wasn't indicated of the health of the business." — Ryan Grimsland (CFO)