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What changed in ADVANCE AUTO PARTS INC's 10-K — 2025 vs 2026

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Paragraph-level year-over-year comparison of ADVANCE AUTO PARTS INC's 2025 and 2026 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2026 report.

+211 added−269 removedSource: 10-K (2026-02-13) vs 10-K (2025-02-26)

Top changes in ADVANCE AUTO PARTS INC's 2026 10-K

211 paragraphs added · 269 removed · 77 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

37 edited+14 added−97 removed18 unchanged
Biggest changeThe Corporate Sustainability and Social Report is not, and will not be deemed to be, a part of this Annual Report on Form 10-K or incorporated by reference into any of the Company’s other filings with the Securities and Exchange Commission (“SEC”). 4 Table of Contents Intellectual Property The Company owns a number of trade names, service marks and trademarks, including “Advance Auto Parts ® ,” “Advance Same Day ® ,” “Carquest ® ,” “CARQUEST Technical Institute ® ,” “DieHard ® ,” “DriverSide ® ,” “MotoLogic ® ,” “MotoShop ® and “TECH-NET Professional Auto Service ® ”, for use in connection with the automotive parts business.
Biggest changeIntellectual Property The Company owns a number of trade names, service marks and trademarks, including “Advance Auto Parts ® ,” “Advance Same Day ® ,” "ARGOS ® ,” “Carquest ® ,” “CARQUEST Technical Institute ® ,” “DieHard ® ,” “DriverSide ® ,” “MotoLogic ® ,” “MotoShop ® ” and “TECH-NET Professional Auto Service ® ”, for use in connection with the automotive parts business.
Company Products The following table shows some of the types of products that the Company sells by major category: Parts & Batteries Accessories & Chemicals Engine Maintenance Batteries and battery accessories Air conditioning chemicals and accessories Air filters Belts and hoses Air fresheners Fuel and oil additives Brakes and brake pads Antifreeze and washer fluid Fuel filters Chassis parts Electrical wire and fuses Grease and lubricants Climate control parts Electronics Motor oil Clutches and drive shafts Floor mats, seat covers and interior accessories Oil filters Engines and engine parts Hand and specialty tools Part cleaners and treatments Exhaust systems and parts Lighting Transmission fluid Hub assemblies Performance parts Ignition components and wire Sealants, adhesives and compounds Radiators and cooling parts Tire repair accessories Starters and alternators Vent shades, mirrors and exterior accessories Steering and alignment parts Washes, waxes and cleaning supplies Wiper blades The Company provides customers with quality products that are often offered at a good, better or best recommendation differentiated by price and quality.
The following table shows some of the types of products that the Company sells by major category: Parts & Batteries Accessories & Chemicals Engine Maintenance Batteries and battery accessories Air conditioning chemicals and accessories Air filters Belts and hoses Air fresheners Fuel and oil additives Brakes and brake pads Antifreeze and washer fluid Fuel filters Chassis parts Electrical wire and fuses Grease and lubricants Climate control parts Electronics Motor oil Clutches and drive shafts Floor mats, seat covers and interior accessories Oil filters Engines and engine parts Hand and specialty tools Part cleaners and treatments Exhaust systems and parts Lighting Transmission fluid Hub assemblies Performance parts Ignition components and wire Sealants, adhesives and compounds Radiators and cooling parts Tire repair accessories Starters and alternators Vent shades, mirrors and exterior accessories Steering and alignment parts Washes, waxes and cleaning supplies Wiper blades The Company provides customers with quality products that are often offered at a good, better or best recommendation, differentiated by price and quality.
While unusually heavy precipitation tends to soften sales as elective maintenance is deferred during such periods, extremely hot or cold weather tends to cause automotive parts to fail at an accelerated rate which can lead to enhanced sales. The fourth quarter is generally the most volatile as weather and spending trade-offs typically influence the professional and DIY sales.
While unusually heavy precipitation tends to soften sales as elective maintenance is deferred during such periods, extremely hot or cold weather tends to cause automotive parts to fail at an accelerated rate which can lead to enhanced sales. The fourth quarter is generally the most volatile as weather and spending trade-offs typically influence professional and DIY sales.
Environmental and Other Regulatory Matters The Company is subject to various federal, state and local laws and governmental regulations relating to the operation of the business, including those governing collection, transportation and recycling of automotive lead-acid batteries, used motor oil and other recyclable items and ownership and operation of real property.
Environmental and Other Regulatory Matters The Company is subject to various federal, state and local laws and governmental regulations relating to the operation of the business, including those governing collection, transportation and recycling of automotive lead-acid batteries, used motor oil and other recyclable items and the ownership and operation of real property.
In 2014, the Company acquired General Parts International, Inc. (“GPI”), a privately-held company that was a leading distributor and supplier of original equipment and aftermarket automotive replacement products for professional markets operating under the Carquest and Worldpac trade names.
In 2014, the Company acquired General Parts International, Inc., a privately-held company that was a leading distributor and supplier of original equipment and aftermarket automotive replacement products for professional markets operating under the Carquest and Worldpac trade names.
These categories of merchandise include batteries, brakes, chassis, ride control, engine management, filtration, chemicals and other parts under various owned brand names such as Carquest ® , DieHard ® , Driveworks ® and Wearever ® .
Other categories of owned brand merchandise include batteries, brakes, chassis, ride control, engine management, filtration, chemicals and other parts under various owned brand names such as Carquest ® , DieHard ® , Driveworks ® and Wearever ® .
In addition, the Company owns and has registered a number of trademarks for the owned brands. The Company believes that these trade names, service marks and trademarks are important to the merchandising strategy.
In addition, the Company owns and has registered a number of trademarks for its owned brands. The Company believes that these trade names, service marks and trademarks are important to the merchandising strategy.
These stores carry a wide variety of products serving aftermarket auto part needs for both domestic and import vehicles with product offerings of approximately 23,600 stock keeping units (“SKUs”), consisting of a custom mix of products based on each store’s market.
These stores carry a wide variety of products serving aftermarket auto part needs for both domestic and import vehicles with product offerings of approximately 23,200 stock keeping units (“SKUs”), consisting of a custom mix of products based on each store’s market.
Item 1. Business. Unless the context otherwise requires, the “Company,” “Advance,” and similar terms refer to Advance Auto Parts, Inc., its subsidiaries and their respective operations on a consolidated basis. The Company’s fiscal year consists of 52 or 53 weeks ending on the Saturday closest to December 31 st each year.
Item 1. Bus iness. Unless the context otherwise requires, the “Company,” “Advance,” and similar terms refer to Advance Auto Parts, Inc., its subsidiaries and their respective operations on a consolidated basis. The Company’s fiscal year consists of 52 or 53 weeks ending on the Saturday closest to December 31 st each year.
Store Development The key factors used in selecting sites and market locations in which the Company operates include population, demographics, traffic count, vehicle profile, number and strength of competitors’ stores and the cost of real estate.
Stores The key factors used in selecting sites and market locations in which the Company operates include population, demographics, traffic count, vehicle profile, number and strength of competitors’ stores and the cost of real estate.
Some of the Company’s brands include Bosch ® , Castrol ® , Dayco ® , Denso ® , Fram ® , Gates ® , Meguiar’s TM , Mobil 1 TM , Moog ® , Monroe ® , NGK ® , Prestone ® , Purolator ® , Trico ® and Wagner ® .
Some of the Company’s brands include Bosch ® , Castrol ® , Dayco ® , Denso ® , Gates ® , Meguiar’s TM , Mobil 1 TM , Moog ® , Monroe ® , NGK ® , Prestone ® , Purolator ® and Wagner ® .
The Company’s website and the information contained therein or linked thereto are not part of this Annual Report on Form 10-K for 2024.
The Company’s website and the information contained therein or linked thereto are not part of this Annual Report on Form 10-K for 2025.
The Company’s primary competitors are (i) both national and regional chains of automotive parts stores, including AutoZone, Inc., NAPA, O’Reilly Automotive, Inc., The Pep Boys-Manny, Moe & Jack and Auto Plus (formerly Uni-Select USA, Inc.), (ii) internet-based retailers, (iii) discount stores and mass merchandisers that carry automotive products, (iv) wholesalers or jobbers stores, including those associated with national parts distributors or associations, (v) independently-owned stores and (vi) automobile dealers that supply parts.
The Company’s primary competitors are (i) both national and regional chains of automotive parts stores, including AutoZone, Inc., NAPA, O’Reilly Automotive, Inc. and Auto Plus (formerly Uni-Select USA, Inc.), (ii) internet-based retailers, (iii) discount stores and mass merchandisers that carry automotive products, (iv) wholesalers or jobbers stores, including those associated with national parts distributors or associations, (v) independently-owned stores and (vi) automobile dealers that supply parts.
The average size of an Advance Auto Parts location (including stores, hubs and market hubs) is approximately 8,000 square feet.
The average size of an Advance Auto Parts location (including stores, hubs and market hubs) is approximately 8,100 square feet.
Compliance with any such laws and regulations has not had a material adverse effect on the operations to date. For more information, see the following disclosures in “ Part I. Item 1A. Risk Factors ” in this report. 5 Table of Contents Available Information The Company’s internet address is www.AdvanceAutoParts.com.
Compliance with any such laws and regulations has not had a material adverse effect on the operations to date. For more information, see the following disclosures in Part I. Item 1A. Risk Factors, of this Annual Report. Available Information The Company’s internet address is www.AdvanceAutoParts.com.
Discontinued Operations of the notes to the Consolidated Financial Statements included herein for further details. On November 13, 2024, the Company’s Board of Directors approved a restructuring and asset optimization plan (“2024 Restructuring Plan”) designed to improve the Company’s profitability and growth potential and streamline its operations.
Refer to Note 19. Discontinued Operations, of the Notes to the Consolidated Financial Statements of this Annual Report for further details. On November 13, 2024, the Company’s Board of Directors approved a restructuring and asset optimization plan (“2024 Restructuring Plan”) designed to improve the Company’s profitability and growth potential and streamline its operations.
This plan is supplemental to other ongoing initiatives to simplify the Company's business and improve profitable growth and entails, among other items, certain store and independent location closures as well as headcount reductions and organizational design changes to align the Company’s workforce to the expected needs of the Company's business.
The 2024 Restructuring Plan is supplemental to other ongoing initiatives, such as our distribution network optimization initiatives, to simplify the Company's business and improve profitable growth and entails, among other items, certain store and independent location closures as well as headcount reductions and organizational design changes to align the Company’s workforce to the expected needs of the Company's business.
The Company accepts customer returns for many new, core and warranty products. Customer returns have historically been immaterial. Customers The Company’s professional customers primarily consist of customers for whom the Company delivers products to their places of business, including garages, service stations and auto dealerships. The Company’s professional sales represented approximately 50% of sales in 2024, 2023 and 2022.
The Company accepts customer returns for many new, core and warranty products. Customer returns have historically been immaterial. 3 Table of Contents Customers The Company’s professional customers primarily consist of customers for whom the Company delivers products to their places of business, including garages, service stations and auto dealerships.
Except where prohibited, the Company also provides a variety of services at its stores free of charge to customers, including: • Battery and wiper installation; • Check engine light scanning; • Electrical system testing, including batteries, starters and alternators; • Oil and battery recycling; and • Loaner tool programs. 3 Table of Contents The Company also serves customers online at www.AdvanceAutoParts.com or on the Advance Mobile App.
Except where prohibited, the Company also provides a variety of services at its stores free of charge to customers, including: • Battery and wiper installation; • Check engine light scanning; • Electrical system testing, including batteries, starters and alternators; • Oil and battery recycling; and • Loaner tool programs.
Human Capital As of December 28, 2024, the Company employed approximately 33,200 full-time team members and 29,600 part-time team members. The Company’s workforce consisted of 87.4% of team members employed in store-level operations, 8.9% in distribution and 3.7% in corporate offices. As of December 28, 2024, approximately 1.5% of team members were represented by labor unions.
Human Capital As of January 3, 2026, the Company employed approximately 28,274 full-time team members and 25,733 part-time team members. The Company’s workforce consisted of 87.4% of team members employed in store-level operations, 8.5% in distribution centers and 4.1% in corporate offices. As of January 3, 2026, approximately 1.7% of team members were represented by labor unions.
The Company also serves 934 independently-owned Carquest stores with shipments directly from distribution centers. DIY customers are primarily served through the Company’s stores, but can also order online to pick up merchandise at a nearby store or have their purchases shipped directly to them.
DIY customers are primarily served through the Company’s stores, but can also order online to pick up merchandise at a nearby store or have their purchases shipped directly to them.
The Company believes it is better able to meet its customers’ needs by operating under two trade names, which are as follows: Advance Auto Parts — The Company’s 4,507 stores, inclusive of 316 hubs, as of December 28, 2024, are generally located in freestanding buildings with a focus on both professional and DIY customers.
The Company believes it is better able to meet its customers’ needs by operating under two trade names, which are as follows: Advance Auto Parts — The Company’s 4,066 Advance Auto Parts stores, inclusive of 255 hubs and 33 market hubs, as of January 3, 2026, are generally located in freestanding buildings across 44 U.S. states and two U.S. territories, with a focus on both professional and DIY customers.
As of December 28, 2024, the Company operated 4,788 stores primarily under the trade names “Advance Auto Parts” and “Carquest.” The Company was founded in 1929 as Advance Stores Company, Incorporated, and operated as a retailer of general merchandise until the 1980s. During the 1980s, the Company began targeting the sale of automotive parts and accessories to DIY customers.
Our stores operate primarily under the trade names “Advance Auto Parts” and “Carquest”. The Company was founded in 1929 as Advance Stores Company, Incorporated, and operated as a retailer of general merchandise, including automotive parts, until the 1980s. During the 1980s, the Company began shifting its focus, specifically targeting the sale of automotive parts and accessories to DIY customers.
On November 1, 2024, the Company completed the sale of the Worldpac business for net proceeds of approximately $1.47 billion after transaction costs and excluding the impact of taxes. The transaction reflects a strategic shift in the Company’s business with increased focus on the Advance blended-box model. Refer to Note 20.
In November 2024, the Company completed the sale of the Worldpac business for net proceeds of approximately $1.44 billion after transaction costs, the final working capital adjustment recorded in the fourth quarter of fiscal 2025 and excluding the impact of taxes. The transaction reflected a strategic shift in the Company’s business with increased focus on the Advance blended-box model.
Merchandise, Marketing and Advertising In 2024, the Company purchased merchandise from over 634 vendors. The Company’s purchasing strategy involves negotiating agreements with vendors to purchase merchandise over a specified period of time along with other provisions, including pricing, rebates, volume and payment terms.
The Company’s purchasing strategy involves negotiating agreements with vendors to purchase merchandise over a specified period, along with other provisions, such as pricing, rebates, volume, and payment terms.
The Company sells products containing hazardous materials as part of the business. In addition, customers may bring automotive lead-acid batteries, used motor oil or other recyclable items onto the properties. The Company currently provides collection and recycling programs for used lead-acid batteries, used oil and other recyclable items at a majority of the stores as a service to its customers.
The Company sells products containing hazardous materials as part of the business. In addition, customers may bring automotive lead-acid batteries, used motor oil or other 5 Table of Contents recyclable items onto the properties.
The Company’s previous three fiscal years ended on December 28, 2024 (“2024”), December 30, 2023 (“2023”) and December 31, 2022 (“2022”) and each included fifty-two weeks of operations. Overview Advance Auto Parts, Inc. and its subsidiaries is a leading automotive aftermarket parts provider in North America, serving both professional installers (“professional”) and “do-it-yourself” (“DIY”) customers, as well as independently-owned operators.
Overview Advance Auto Parts, Inc. and its subsidiaries is a leading automotive aftermarket parts provider in North America, serving both professional installers (“professional”) and “do-it-yourself” (“DIY”) customers, as well as independently-owned operators.
On November 14, 2024, the Company announced the 2024 Restructuring Plan, which includes the reduction of approximately 500 stores, approximately 200 independent locations and four distribution centers by mid-2025. The Company serves its professional and DIY customers through a variety of channels ranging from traditional “brick and mortar” store locations to self-service e-commerce sites.
The Company serves its professional and DIY customers through a variety of channels ranging from traditional “brick and mortar” store locations to self-service e-commerce sites.
In addition to these branded products, the Company stocks a wide selection of high-quality owned brand products with a goal of appealing to value-conscious customers.
In addition to these branded products, the Company stocks a wide selection of high-quality owned brand products with a goal of appealing to value-conscious customers, including our new oil and fluids brand, ARGOS ® , launched in January 2026, designed to meet growing consumer demand for high-quality, affordable auto care products.
The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at www.sec.gov. 6 Table of Contents Item 1A. Risk Factors.
The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at www.sec.gov. We routinely use our investor relations website, at ir.advanceautoparts.com, as a primary channel for disclosing key information to our investors.
For the DieHard ® brand, the Company owns the right to sell batteries and to extend the DieHard ® brand into other automotive and vehicular categories. The Company granted the seller an exclusive royalty-free, perpetual license to develop, market and sell DieHard ® branded products in certain non-automotive categories.
For the DieHard ® brand, the Company owns the right to sell batteries and to extend the DieHard ® brand into other automotive and vehicular categories.
Supplementing the Company’s stores’ inventory on-hand, less common SKUs are also available on a same-day or next-day basis from any of the larger hub stores or market hub locations. 2 Table of Contents Carquest — The Company’s 281 stores as of December 28, 2024, including 149 stores in Canada, are generally located in freestanding buildings with a primary focus on professional customers, but also serve DIY customers.
Supplementing the Company’s stores’ inventory on-hand, less common SKUs are also available on a same-day or next-day basis from any of the larger hub stores or market hub locations.
The average size of a Carquest store is approximately 7,500 square feet. These stores carry a wide variety of products serving the aftermarket auto part needs for both domestic and import vehicles with a product offering of approximately 16,400 SKUs. As of December 28, 2024, 934 independently-owned stores operated under the Carquest name.
These stores carry a wide variety of products serving the aftermarket auto part needs for both domestic and import vehicles with a product offering of approximately 19,100 SKUs. As of January 3, 2026, 809 independently-owned stores operated under the Carquest name. The Company serves the stores primarily from its executive office in Raleigh, NC.
The Company’s marketing and advertising programs are designed to drive brand awareness, consideration by consumers and omnichannel traffic by position in the aftermarket auto parts category.
The Company granted the seller an exclusive royalty-free, perpetual license to develop, market and sell DieHard ® branded products in certain non-automotive categories. 4 Table of Contents The Company’s marketing and advertising programs are designed to drive brand awareness, consideration by consumers and omnichannel traffic by position in the aftermarket auto parts category.
Professional customers can conveniently place their orders electronically, including through MyAdvance.com, by phone or in-store, and the Company delivers products to their places of business. Supply Chain The Company’s supply chain consists of a network of distribution centers, hubs and stores that enable the Company to provide same-day or next-day availability to customers.
The Company also serves customers online at www.AdvanceAutoParts.com or on the Advance Mobile App. Professional customers can conveniently place their orders electronically, by phone, or in-store, and the Company delivers products to their places of business.
As of December 28, 2024, the Company operated 28 distribution centers, ranging in size from approximately 70,000 to 943,000 square feet with total square footage of approximately 8.5 million, including one distribution center dedicated to reclamations.
In addition to providing replenishment to nearby stores, market hubs enhance retail operations through improved parts availability. As of January 3, 2026, the Company operated 19 distribution centers, including 3 in Canada, ranging in size from approximately 70,000 to 943,000 square feet with total square footage of approximately 7.2 million.
Stores During 2024, 42 stores were opened and 40 were closed, resulting in a total of 4,788 stores as of December 28, 2024 compared with a total of 4,786 stores as of December 30, 2023.
During 2025, 39 stores were opened and 522 were closed, resulting in a total of 4,305 stores as of January 3, 2026 compared with a total of 2 Table of Contents 4,788 stores as of December 28, 2024. During fiscal year 2025, the Company completed the footprint optimization portion of its 2024 Restructuring Plan.
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The Company is also pursuing efficiencies in procurement, pricing and professional and outside services, in addition to operational efficiencies. Refer to Note 3. Restructuring of the notes to the Consolidated Financial Statements included herein for further details.
Added
The Company’s fiscal year ended January 3, 2026 (“2025”) included fifty-three weeks of operations. The Company’s previous two fiscal years ended on December 28, 2024 (“2024”) and December 30, 2023 (“2023”), respectively, each included fifty-two weeks of operations.
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As of December 28, 2024, 4,639 stores were located across 48 U.S. states and two U.S. territories, and 149 stores were located across six Canadian provinces. The Company serves the stores primarily from its executive office in Raleigh, NC.
Added
As of January 3, 2026, the Company operated 4,305 stores primarily within the United States, with additional locations in Canada, Puerto Rico and the U.S. Virgin Islands. In addition, as of January 3, 2026, we served 809 independently owned Carquest branded stores across the same geographic locations served by our stores in addition to Mexico and various Caribbean islands.
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In 2024, the Company converted eight distribution centers to market hubs, closed four distribution centers as a result of the 2024 Restructuring Plan and closed one distribution center as part of the normal course of business. Additionally, nine distribution centers were sold as part of the Worldpac transaction.
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The Company completed its store footprint optimization with all intended store and independent location closures under the 2024 Restructuring Plan during the first quarter of 2025. Refer to Note 3. Restructuring, of the Notes to the Consolidated Financial Statements of this Annual Report for further details.
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Additional information about the Company’s human capital resources can be found in the Corporate Sustainability and Social Report, which is available on the Company’s website.
Added
During fiscal 2025, the Company continued executing its multi-year strategic plan to drive operational efficiencies, which focuses on merchandising excellence, supply chain transformation and store operations.
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One should consider carefully the risks and uncertainties described below together with the other information included in this Annual Report on Form 10-K, including without limitation, the Company’s consolidated financial statements and related notes thereto and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies .
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Carquest — The Company’s 239 Carquest stores as of January 3, 2026, including 157 stores in Canada, are generally located in freestanding buildings with a primary focus on professional customers, but also serve DIY customers. The average size of a Carquest store is approximately 6,600 square feet.
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The occurrence of any of the following risks could materially adversely affect the Company’s business, financial condition, results of operations, cash flows and future prospects, which could in turn materially affect the price of the Company’s common stock.
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Company Products The Company offers a comprehensive portfolio of replacement parts, maintenance items, accessories and tools to support the full lifecycle of vehicles. With an expansive footprint and a wide assortment of products, the Company believes it is well-positioned to meet a broad range of customer needs in a highly fragmented industry.
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Risks Related to the Company’s Operations and Strategy If we are unable to successfully implement our business strategy, our business, financial condition, results of operations and cash flows could be adversely affected. The Company undertook a comprehensive strategic and operational review to improve its performance of its business and create long-term value.
Added
The Company’s professional sales represented approximately 50% of sales in each of fiscal years 2025, 2024 and 2023. The Company also serves 809 independently-owned Carquest stores with shipments directly from distribution centers.
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This review resulted in, among other things, narrowed business priorities and initiatives aimed at improving core performance in key areas. The Company is currently making and expects to continue to make significant investments to improve its business.
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Supply Chain The Company’s supply chain consists of a multi-echelon network of distribution centers, hubs and stores that enable the Company to provide same-day or next-day availability to customers. The Company is executing supply chain initiatives to drive efficiency, improve inventory availability and establish a scalable foundation to support merchandising precision and profitable growth.
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If the Company is unable to implement initiatives efficiently and effectively, the Company’s business, financial condition, results of operations and cash flows could be adversely affected. The Company could also be adversely affected if it has not appropriately prioritized and balanced its initiatives or if the Company is unable to effectively manage change throughout the organization.
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The redesign is intended to leverage current assets and operate fewer, more productive distribution centers that focus on replenishment and move more parts closer to the customer. To achieve this plan, the Company is in the process of converting certain distribution centers and stores into market hubs, and opening new market hubs.
Removed
Implementing strategic initiatives could disrupt or reduce the efficiency of the Company’s operations and may not provide the anticipated benefits, or may provide them on a delayed schedule or at a higher cost. These risks increase when significant changes are undertaken and when multiple projects with interdependencies and shared human resources are pursued simultaneously.
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In addition, the Company also has one distribution center dedicated to reclamations. As of January 3, 2026, the Company also operated 33 market hub locations. Merchandise, Marketing and Advertising In 2025, the Company purchased merchandise from over 730 vendors.
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Restructuring our operations is a significant undertaking and introduces risk to the continuity and results of the Company's operations. In November 2024, the Company announced a plan to restructure its operations to improve profitability and growth potential and streamline the Company's operations.
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Our human capital management strategy focuses on attracting, developing, and retaining the highest quality talent. We work to achieve these objectives by offering competitive compensation, comprehensive benefits, and opportunities for career growth and development.
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This plan is supplemental to other ongoing initiatives to simplify the Company's business and improve profitable growth and entails, among other items, certain store and independent location closures as well as headcount reductions and organizational design changes to align the Company’s workforce to the expected needs of the Company's business.
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The Company currently provides collection and recycling programs for used lead-acid batteries, used oil and other recyclable items at the majority of its stores as a service to its customers.
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The Company is also pursuing efficiencies in procurement, pricing and professional and outside services, in addition to operational efficiencies.
Added
We may use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor our investor relations website, in addition to following our press releases, filings with the SEC, public conference calls, presentations, and webcasts.
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These measures are subject to known and unknown risks and uncertainties, including whether the Company has targeted the appropriate areas for its cost-saving efforts and at the appropriate scale, the Company's ability to successfully execute the restructuring plan and achieve the cost-savings anticipated while minimally disrupting our operations and whether, if required in the future, the Company will be able to appropriately target any additional areas for its cost-saving efforts.
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The references to our website addresses do not constitute incorporation by reference of the information contained on the websites, which should not be considered part of this Form 10-K. 6 Table of Contents
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The Company expects to incur restructuring charges and undertake other exit-related activities as a result of such initiatives.
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For example, execution of the Company’s plan is expected to result in the termination of certain leases, leading to exits of certain properties over time and the incurrence of expenses, including but not limited to impairment charges and contingent obligations, which could be material.
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The terms, scope and timing of any additional changes to our lease obligations, as well as any other effects on our landlord relationships or reputation with other real estate owners, are uncertain.
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As a result of the restructuring plan, the Company currently expects to incur approximately $875 million to $960 million in total charges, which is estimated to include $275 million to $310 million of cash charges and $600 million to $650 million of non-cash charges, primarily as a result of closure sites and the reduction in workforce.
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The Company’s expectations for charges to be incurred and cash to be expended in connection with the restructuring activities are based on a number of assumptions, and the Company may experience unanticipated consequences, such as higher than anticipated lease termination and facility closure costs, asset impairment or other unforeseen expenses related to the restructuring.
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Implementing any restructuring plan, including the one the Company has outlined, presents potential risks that may impair our ability to achieve or sustain anticipated cost reductions or operational improvements.
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These risks include the potential for management distraction from ongoing business activities, requirement of capital investment that could otherwise be used for the operation and growth of the Company’s existing business, inadequate support of important business functions due to staffing changes and other cost reduction efforts, delays or inability to achieve targeted efficiencies as a result of economic, competitive or other factors, failure to maintain adequate controls and procedures while executing our restructuring plans, disruptions to important business relationships, and damage to our reputation and brand.
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Additionally, as a result of restructuring initiatives, the Company may experience a loss of continuity and accumulated knowledge or increased employee attrition and difficulty attracting and retaining highly skilled employees, which may, among other things, slow the progress of 7 Table of Contents our turnaround initiatives or impair the Company’s ability to maintain and enhance the Company’s internal controls and procedures.
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The implementation of the Company’s restructuring efforts, including the potential reduction of the Company’s facilities and workforce, may not improve our operational and cost structure or result in greater efficiency of the Company’s organization; and the Company may not be able to support sustainable profitable growth following the Company’s restructuring actions.
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Failure to achieve or sustain the expected cost reductions and other benefits related to these restructuring initiatives could have a material adverse effect on the Company’s results of operations, financial condition and cash flows. We are exposed to risks associated with potential divestitures, which may impact our ability to fully realize the anticipated benefits of those transactions.
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The Company recently sold its Worldpac business. Divestitures are complex transactions involving inherent risks, including the potential for distractions of management from the core remaining business of the Company and the occurrence of events that may impact our ability to fully realize the anticipated benefits of the divestitures.
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Transactions of this nature carry risks associated to variation from expectations, including with respect to provision of transition services and post-closing claims for liability. If we are unable to adequately design, implement, operate and maintain various information and technology systems, our ability to conduct business could be negatively impacted .
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The Company is dependent on information and technology systems to facilitate the day-to-day operations of the business and to produce timely, accurate and reliable information on financial and operational results. The company is in the process of designing, implementing and updating various systems.
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These initiatives will require significant investment of human and financial resources, and the Company may experience significant delays, increased costs and other difficulties with these projects. Deficiencies in the design or implementation or maintenance of these systems could lead to inaccuracy of data and disruption to the Company’s business operations.
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In addition, the Company is utilizing data analytics and piloting the use of advance technological applications to support various business initiatives. Any inability on our part to properly capture or interpret data may impair our ability to successfully execute our business plans.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

7 edited+0 added−0 removed4 unchanged
Biggest changeAs of December 28, 2024, we are not aware of any instances of material cybersecurity incidents that impacted the Company in the last three years.
Biggest changeThe Audit Committee receives reports on cybersecurity risk and management thereof at least semi-annually, and the full Board of Directors receives such reports at least annually. 19 Table of Contents As of January 3, 2026 , we are not aware of any instances of material cybersecurity incidents, including third-party incidents, that impacted the Company in the last three years. 20 Table of Contents
Cybersecurity is a component of the Company’s ERM framework and processes. The Company utilizes a range of capabilities to help identify and assess potential cyber threats and vulnerabilities, which feed into the development and regular updating of a risk mitigation plan to help manage the Company’s cybersecurity risk posture.
Cybersecurity is a component of the Company’s enterprise risk management ("ERM") framework and processes. The Company utilizes a range of capabilities to help identify and assess potential cyber threats and vulnerabilities, which feed into the development and regular updating of a risk mitigation plan to help manage the Company’s cybersecurity risk posture.
The Company’s CISO leads the Cyber Steering Committee, which also includes individuals with experience identifying and managing enterprise risks, including the Company’s President and Chief Executive Officer, Executive Vice President, Chief Financial Officer, Executive Vice President, General Counsel and Corporate Secretary and Vice President, Chief Audit Executive, as well as individuals with technical expertise in information technology, data governance and cyber matters and/or experience in managing cyber incident responses, including the Company’s Executive Vice President, Chief Technology Officer, Vice President, Information Technology Operations and Senior Vice President, Deputy General Counsel and Chief Compliance Officer.
The Company’s Chief Information Security Officer (“CISO”) leads the Cyber Steering Committee, which also includes individuals with experience identifying and managing enterprise risks, including the Company’s President and Chief Executive Officer, Executive Vice President, Chief Financial Officer, Executive Vice President and General Counsel and Corporate Secretary as well as individuals with technical expertise in information technology, data governance and cyber matters and/or experience in managing cyber incident responses, including the Company’s Chief Technology Officer, Senior Vice President, Information Technology Operations and Senior Vice President, Deputy General Counsel.
Item 1C. Cybersecurity. The Company has processes in place for assessing, identifying and managing risks from potential cyber threats and vulnerabilities.
Item 1C. Cyberse curity. The Company has processes in place for assessing, identifying and managing risks from potential cyber threats and vulnerabilities.
The Company’s cyber risk mitigation plan is reviewed on a bimonthly cadence with a cross-functional Cyber Steering Committee, the managerial governing body that regularly reviews the top cyber risks and receives reports on progress on key cyber initiatives.
The Company’s cyber risk mitigation plan is reviewed on a quarterly cadence by a cross-functional Cyber Steering Committee, the managerial governing body that regularly reviews the top cyber risks to the Company and receives reports on progress on key cyber initiatives.
The Audit Committee of the Company’s Board of Directors is charged with reviewing, discussing with management and overseeing the Company’s information technology and cybersecurity risk. The Audit Committee receives reports on cybersecurity risk and management thereof at least semi-annually, and the full Board of Directors receives such reports at least annually.
The Audit Committee of the Company’s Board of Directors is charged with reviewing, discussing with management and overseeing the Company’s information technology and cybersecurity risk.
To protect the Company’s information systems from cyber threats, the Company uses a variety of tools, controls, technologies, methods, systems and other processes that are designed to prevent, detect, escalate, investigate, mitigate and/or remediate data loss, theft, misuse, unauthorized access or other security incidents or vulnerabilities affecting information systems and data. 16 Table of Contents The Company’s Chief Information Security Officer (“CISO”) and Vice President, Chief Audit Executive, who oversees the Company’s enterprise risk management (“ERM”) framework, partner on definition and treatment of cyber risks.
To protect the Company’s information systems from cyber threats, the Company uses a variety of tools, controls, technologies, methods, systems and other processes that are designed to prevent, detect, escalate, investigate, mitigate and/or remediate data loss, theft, misuse, unauthorized access or other security incidents or vulnerabilities affecting information systems and data.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−7 removed0 unchanged
Biggest changeLegal Proceedings. Refer to discussion in Note 1 4 . Contingencies , of the Notes to the Consolidated Financial Statements included herein for information relating to legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 17 Table of Contents PART II Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Biggest changeLegal Pro ceedings. Refer to discussion in Note 14. Commitments and Contingencies, of the Notes to the Consolidated Financial Statements of this Annual Report for information relating to legal proceedings. Item 4. Mine Safe ty Disclosures. Not applicable. 21 Table of Contents PA RT II
The following table summarizes the location, ownership status and total square footage of space utilized for distribution centers, principal corporate office and retail stores as of December 28, 2024: Square Footage (in thousands) Location Leased Owned Distribution centers 28 locations in 22 U.S. states and three Canadian provinces 3,929 4,591 Executive office Raleigh NC 245 — Stores 4,639 stores in 48 U.S. states and two U.S. territories and 149 stores in six Canadian provinces 31,637 6,276 Item 3.
The following table summarizes the location, ownership status and total square footage of space utilized for distribution centers, principal corporate office and retail stores as of January 3, 2026: Square Footage (in thousands) Stores and Properties Location Leased Owned Distribution Centers 16 locations in fifteen U.S. states and 3 locations in three Canadian provinces 2,838 4,374 Executive Office Raleigh NC 245 — Stores 4,148 stores in forty four U.S. states and two U.S. territories and 157 stores in six Canadian provinces 28,403 6,130 Item 3.
Removed
The Company’s common stock is listed on the New York Stock Exchange under the symbol “AAP.” As of February 21, 2025, there were 1,112 holders of record of common stock, which does not include the number of beneficial owners whose shares were repres ented by security position listings.
Removed
The following table sets forth information with respect to repurchases of the Company’s common stock for the fourth quarter ended December 28, 2024: Period Total Number of Shares Purchased (1) Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Dollar Value that May Yet Be Purchased Under the Programs ( in thousands ) (2) October 6, 2024 to November 2, 2024 — $ — — $ 947,339 November 3, 2024 to November 30, 2024 18,062 $ 38.13 — $ 947,339 December 1, 2024 to December 28, 2024 4,615 $ 43.66 — $ 947,339 Total 22,677 $ 39.26 — (1) All repurchases reported in this table relate to the withholding of shares upon the vesting of restricted stock units to settle income tax liabilities (“net settlement”).
Removed
The aggregate cost of repurchasing shares in connection with the net settlement of shares issued as a result of the vesting of restricted stock units was $0.9 million, or an average price of $39.26 per share, during the twelve weeks ended December 28, 2024.
Removed
(2) On February 8, 2022, the Board of Directors authorized an additional $1 billion to the existing share repurchase program. This authorization is incremental to the $1.7 billion that was previously authorized by the Board of Directors.
Removed
Amendment No. 5 to the Company’s 2021 Credit Agreement currently generally prohibits open market share repurchases. 18 Table of Contents Stock Price Performance The following graph shows a comparison of the cumulative total return on the Company’s common stock, the Standard & Poor’s (“S&P”) 500 Index and the S&P’s Retail Index.
Removed
The graph assumes that the value of an investment in the Company’s common stock was $100.00 on December 28, 2019, and that any dividends have been reinvested. The comparison in the graph below is based solely on historical data and is not intended to forecast the possible future performance of the Company’s common stock.
Removed
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG ADVANCE AUTO PARTS, INC., S&P 500 INDEX AND S&P RETAIL INDEX Company/Index December 28, 2019 January 2, 2021 January 1, 2022 December 31, 2022 December 30, 2023 December 28, 2024 Advance Auto Parts $ 100.00 $ 100.24 $ 155.04 $ 98.45 $ 40.70 $ 29.34 S&P 500 Index $ 100.00 $ 118.08 $ 151.98 $ 124.46 $ 157.17 $ 199.46 S&P Retail Index $ 100.00 $ 145.42 $ 173.50 $ 114.02 $ 162.36 $ 219.96 19 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

0 edited+8 added−61 removed0 unchanged
Removed
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ” for further details on the Company’s share repurchase program. Capital Expenditures The Company’s primary capital re quirements have been the funding of the Company’s investments in information technology and supply chain, e-commerce and maintenance of existing stores.
Added
Item 5. Market for Registrant ’ s Common Equ ity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Removed
The Company leases approximately 83% o f the Company’s stores. The Company’s capital expenditures were $180.8 million in 2024, a decrease of $44.9 million from 2023, related to the decrease of spend in information technology, fewer store openings and fewer marketing-related projects from 2023 to 2024.
Added
The Company’s common stock is listed on the New York Stock Exchange under the symbol “AAP.” As of February 9, 2026, there were 1,131 holders of record of common stock, which does not include the number of beneficial owners whose shares were represented by security position listings.
Removed
The Company’s future capital requirements will depend in large part on the timing or number of the investments the Company makes in information technology and supply chain network initiatives and existing stores and new store development (leased and owned locations) within a given year.
Added
The following table sets forth information with respect to repurchases of the Company’s common stock for the fourth quarter ended January 3, 2026: Period Total Number of Shares Purchased (1) Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Dollar Value that May Yet Be Purchased Under the Programs (in millions) (2) October 5, 2025 to November 1, 2025 103 $ 36.14 — $ 947 November 2, 2025 to November 29, 2025 3,680 $ 51.45 — $ 947 November 30, 2025 to January 3, 2026 3,601 $ 52.50 — $ 947 Total 7,384 $ 51.75 — (1) All repurchases reported in this table relate to the withholding of shares upon the vesting of restricted stock units to settle income tax liabilities (“net settlement”).
Removed
In 2025, the Company anticipates that the Company’s capital expenditures related to such investments will be approximately $300 million but may vary with business conditions. 27 Table of Contents Analysis of Cash Flows The following table summarizes the Company’s cash flows from operating, investing and financing activities: Year Ended (in thousands) December 28, 2024 December 30, 2023 December 31, 2022 Cash flows provided by operating activities from continuing operations $ 140,504 $ 141,788 $ 622,638 Cash flows (used in) provided by operating activities from discontinued operations (55,871) 145,587 113,933 Cash flows used in investing activities from continuing operations (167,406) (218,750) (399,520) Cash flows provided by (used in) investing activities from discontinued operations 1,522,160 (16,739) (24,928) Cash flows (used in) provided by financing activities (75,010) 189,267 (620,704) Effect of exchange rate changes on cash 1,569 (8,487) (8,664) Net increase (decrease) in cash and cash equivalents $ 1,365,946 $ 232,666 $ (317,245) Operating Activities In 2024, cash flows provided by operating activities decreased $1.3 million to $140.5 million.
Added
The aggregate cost of repurchasing shares in connection with the net settlement of shares issued as a result of the vesting of restricted stock units was $0.4 million, or an average price of $51.75 per share, during the thirteen weeks ended January 3, 2026.
Removed
The net decrease in cash flows provided by operating activities was primarily attributable to lower net income and provision for deferred income taxes offset by an increase in net working capital compared with 2023 prior year. Refer to “ Results of Operations ” for further details on the Company’s results.
Added
(2) On February 8, 2022, the Board of Directors authorized an additional $1 billion to the existing share repurchase program. This authorization is incremental to the $1.7 billion that was previously authorized by the Board of Directors.
Removed
Investing Activities In 2024, cash flows used in investing activities decreased $51.3 million to $167.4 million compared with 2023. This decrease was attributable to fewer store openings, lower capital spend in information technology and marketing-related development projects. Financing Activities In 2024, cash flows used in financing activities increased by $264.3 million to $75.0 million compared with 2023.
Added
Amendment No. 5 to the Company's 2021 Credit Agreement, which was terminated on August 12, 2025, and replaced by the ABL facility, generally prohibited open market share repurchases. Share repurchases are generally permitted under the Company's ABL facility, however, under certain circumstances, the Company's ability to repurchase shares may be restricted.
Removed
The net increase in cash used in financing activities was attributable to the issuances of senior unsecured notes in the prior year partially offset by a decrease in dividends paid in the current year compared with 2023. The Company’s Board of Directors has declared a quarterly cash dividend since 2006.
Added
Stock Price Performance The following graph shows a comparison of the cumulative total return on the Company’s common stock, the Standard & Poor’s (“S&P”) 500 Index and the S&P’s Retail Index. The graph assumes that the value of an investment in the Company’s common stock was $100.00 on January 2, 2021, and that any dividends have been reinvested.
Removed
Any payments of dividends in the future will be at the discretion of the Company’s Board of Directors and will depend upon the Company’s results of operations, cash flows, capital requirements and other factors deemed relevant by the Company’s Board of Directors. In addition, Amendment No. 5 to the 2021 Credit Agreement prevents the Company from increasing its cash dividends.
Added
The comparison in the graph below is based solely on historical data and is not intended to forecast the possible future performance of the Company’s common stock. 22 Table of Contents COMPARISON OF CUMULATIVE TOTAL RETURN AMONG ADVANCE AUTO PARTS, INC., S&P 500 INDEX AND S&P RETAIL INDEX Company/Index January 2, 2021 January 1, 2022 December 31, 2022 December 30, 2023 December 28, 2024 January 3, 2026 Advance Auto Parts $ 100.00 $ 154.68 $ 98.22 $ 41.63 $ 30.60 $ 27.63 S&P 500 Index $ 100.00 $ 128.71 $ 105.40 $ 133.10 $ 168.91 $ 196.57 S&P Retail Index $ 100.00 $ 119.31 $ 78.41 $ 111.65 $ 151.26 $ 153.60 Item 6.
Removed
Long-Term Debt On March 9, 2023, the Company issued the 5.90% senior unsecured notes due 2026 (the “2026 Notes”) at 99.94% of the principal amount of $300.0 million and the 5.95% senior unsecured notes due 2028 (the “2028 Notes”) at 99.92% of the principal amount of $300.0 million.
Removed
The 2026 Notes and 2028 Notes bear interest at a rate of 5.90% and 5.95%, respectively, and are payable semi-annually in arrears in March and September. Proceeds from the Company’s 2026 and 2028 Notes were utilized to make repayments on the Company’s revolving facility and supplement operational and capital expenditures.
Removed
For additional information on transactions entered into relating to long-term debt during the fifty-two weeks ended December 28, 2024, refer to Note 7 .
Removed
Long-term Debt and Fair Value of Financial Instruments of the Notes to the Consolidated Financial Statements included herein. 28 Table of Contents As of February 26, 2025, the Company had a credit rating from S&P of BB+ and from Moody’s Investor Service of Ba1. The current outlooks by S&P and Moody’s were negative and stable, respectively.
Removed
The current pricing grid used to determine the Company’s borrowing rate under the Company’s revolving credit facility is based on the Company’s credit ratings. If the Company’s credit ratings decline, it would negatively impact the Company’s interest rate, and the Company’s access to additional financing on favorable terms may be limited.
Removed
In addition, the Company’s current revolving credit facility would require securitization in the event of further decline in the Company’s credit rating from S&P.
Removed
As previously disclosed, a decline in credit ratings or perceived creditworthiness, among other factors, may impact participation in supplier finance programs, which in turn could shorten payable terms, result in an increase in working capital requirements or otherwise negatively impact capital resources. With respect to all senior unsecured notes for which Advance Auto Parts, Inc.
Removed
(“Issuer”) is an issuer or provides a full and unconditional guarantee, Advance Stores, a wholly-owned subsidiary of the Issuer, serves as the guarantor (“Guarantor Subsidiary”).
Removed
The subsidiary guarantees related to the Company’s senior unsecured notes are full and unconditional and joint and several, and there are no restrictions on the ability of the Issuer to obtain funds from its Guarantor Subsidiary. The Company’s captive insurance subsidiary, an insignificant wholly-owned subsidiary of the Issuer, does not serve as guarantor of the Company’s senior unsecured notes.
Removed
Contractual and Off Balance Sheet Obligations The Company entered into operating leases for certain store locations, distribution centers, office spaces, equipment and vehicles. The Company’s property leases generally contain renewal and escalation clauses and other concessions.
Removed
These provisions are considered in the Company’s calculation of the Company’s minimum lease payments that are recognized as expense on a straight-line basis over the applicable lease term. Any lease payments that are based upon an existing index or rate are included in the Company’s minimum lease payment calculations.
Removed
As of December 28, 2024, the Company’s operating lease obligations were $2.4 billion. As of December 28, 2024, the Company’s long-term debt, consisting of senior unsecured notes with varying maturities through 2032, was $1.8 billion. Future interest payable related to long-term debt was $380.0 million as of December 28, 2024.
Removed
As part of the Company’s normal operations, the Company enters into purchase commitments primarily for the purchase of goods or services that are enforceable, legally binding and specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.
Removed
As of December 28, 2024, the Company’s purchase commitments were $147.5 million.
Removed
On February 27, 2023, the Company entered into Amendment No. 1 (“Amendment No. 1”) to the Credit Agreement, dated November 9, 2021, with Advance Auto Parts, Inc., as Borrower, Advance Stores Company, Incorporated, as a Guarantor, the lenders party thereto, and Bank of America, N.A., as administrative agent (“2021 Credit Agreement”).
Removed
Amendment No. 1 extended the maturity date of the 2021 Credit Agreement by one year from November 9, 2026, to November 9, 2027. Amendment No. 1 also replaced an adjusted LIBOR benchmark rate with a Term Secured Overnight Financing Rate benchmark rate, as adjusted by an increase of ten basis points, plus the applicable margin under the 2021 Credit Agreement.
Removed
Amendment No. 1 made no other material changes to the terms of the 2021 Credit Agreement.
Removed
On August 21, 2023, the Company entered into Amendment No. 2 (“Amendment No. 2”) to the 2021 Credit Agreement in order to amend certain financial covenants related to the Consolidated Coverage Ratio (as defined therein), and on November 20, 2023, the Company entered into Amendment No. 3 (“Amendment No. 3”) to the 2021 Credit Agreement in order to further amend financial covenants related to the Consolidated Coverage Ratio.
Removed
Pursuant to Amendment No. 2 and Amendment No. 3, the Company may not permit the Consolidated Coverage Ratio to be less than (a) 1.75 to 1.00 for each period of four fiscal quarters ending on October 7, 2023 through and including the period of four fiscal quarters ending on October 5, 2024, (b) 2.00 to 1.00 for each period of four fiscal quarters ending on December 28, 2024 through and including the period of four fiscal quarters ending on October 4, 2025 and (c) 2.25 to 1.00 for each period of four fiscal quarters ending after October 4, 2025.
Removed
Amendment No. 2. and Amendment No. 3 made no other material changes to the terms of the 2021 Credit Agreement. On February 26, 2024, the Company entered into Amendment No. 4 (“Amendment No. 4”) to the 2021 Credit Agreement to enable certain addbacks to the definition of Consolidated EBITDA contained therein for specific write-downs of inventory and vendor receivables.
Removed
Amendment No. 4 also updated certain limitations on future incurrences of other indebtedness and liens, replacing the cap thereon of 10% of consolidated net tangible assets with $400 million, and eliminated the $250 million basket for accounts receivable securitization transactions. Amendment No. 4 made no other material changes to the terms of the 2021 Credit Agreement.
Removed
In addition to the Company’s Consolidated Coverage Ratio requirement, the Company was required to maintain a maximum leverage ratio of 3.75 to 1.00. On November 13, 2024, the Company entered into Amendment No. 5 to the 2021 Credit Agreement.
Removed
Amendment No. 5 (i) permits up to $575 million of certain restructuring charges to be added back to Consolidated EBITDAR (as defined therein), (ii) permits up to $800 million of unrestricted cash to be netted out of debt in the calculation of the Leverage Ratio (as defined therein), and (iii) reduced the minimum Consolidated Coverage Ratio (as defined therein) to 1.50 to 1.00 through July 12, 2025 and 1.75 to 1.00 thereafter.
Removed
Amendment No. 5 also reduced the unsecured revolving credit facility under the 2021 Credit Agreement from $1.2 billion to $1.0 billion and amended the pricing on the loans thereunder in connection with changes in the Company’s credit ratings. 29 Table of Contents Amendment No. 5 also updated certain covenants and other limitations on the Company, including (i) expanding the scope of the covenant restricting the ability to create, incur or assume additional debt to cover Advance Auto Parts, Inc., (ii) restricting the Company’s rights to complete share repurchases and increase cash dividend amounts, (iii) requiring the Company to grant liens on deposit accounts, inventory and accounts receivables if credit ratings are downgraded below a minimum threshold, (iv) imposing an additional monthly minimum daily liquidity financial covenant of $750 million, (v) providing for the maturity date under the 2021 Credit Agreement to automatically spring forward to the extent necessary for the 2021 Credit Agreement to mature at least 91 days prior to any scheduled maturity date under any of the Company’s senior unsecured notes, (vi) prohibiting further extensions of the maturity date under the 2021 Credit Agreement beyond the existing maturity date, and (vii) eliminating certain baskets for additional indebtedness, liens, and asset sales.
Removed
On February 25, 2025, the Company entered into Amendment No. 6 (“Amendment No. 6”) to the 2021 Credit Agreement to, among other things, (i) expand the scope of domestic subsidiaries that would be required to grant security interests and guarantee the Company’s obligations under the 2021 Credit Agreement upon the occurrence of a Springing Lien Trigger Event (as defined therein) to include all of the Company’s subsidiaries other than the Company’s Insignificant Subsidiaries (as defined in Amendment No. 6), (ii) revise the definition of Consolidated Coverage Ratio to exclude up to $175 million of accelerated rent charges related to lease buyouts and to permit the minimum Consolidated Coverage Ratio to remain at 1.50 to 1.00 for one additional quarter before increasing to 1.75 to 1.00 on and after the fiscal quarter ending on January 3, 2026, (iii) revise the definition of Consolidated EBITDA to increase the threshold for Identified Restructuring Charges (as defined therein) from $575 million to $625 million, and (iv) expand the scope of the guaranteed obligations to include bank product obligations and cash management obligations.
Removed
The Company’s compliance with these covenants will depend upon achieving the Company’s financial targets including improvements in operating income. As of December 28, 2024, giving consideration to the amendments to the Company’s 2021 Credit Agreement through that date, the Company was in compliance with the financial covenants required thereby.
Removed
The Company currently expects to be in compliance with these financial covenants for the next 12 months. However, risk of noncompliance increases if the Company’s financial performance worsens or the Company is required to increase borrowings to fund operations.
Removed
If the Company is not in compliance with the financial covenants required by the 2021 Credit Agreement, and cannot timely secure an amendment or waiver thereof, the Company would be in default of the 2021 Credit Agreement and the Company’s outstanding senior unsecured notes, which would have a material adverse impact on the Company’s financial condition.
Removed
Critical Accounting Policies The Company’s financial statements have been prepared in accordance with GAAP. The Company’s discussion and analysis of the financial condition and results of operations are based on these financial statements. The preparation of these financial statements requires the application of accounting policies in addition to certain estimates and judgments by the Company’s management.
Removed
The Company’s estimates and judgments are based on currently available information, historical results and other assumptions the Company believes are reasonable. Actual results could differ materially from these estimates. The preparation of the Company’s financial statements included the following significant estimates and exercise of judgment.
Removed
Vendor Incentives The Company receives incentives in the form of reductions to amounts owed and/or payments from vendors related to volume rebates and other promotional considerations. Many of these incentives are under agreements with terms in excess of one year, while others are negotiated on an annual basis or less.
Removed
Advertising allowances received as a reimbursement of specific, incremental and identifiable costs incurred to promote a vendor’s products are included as an offset to SG&A when the cost is incurred.
Removed
Volume rebates and vendor promotional allowances that do not meet the requirements for offsetting in SG&A and that are earned based on inventory purchases are initially recorded as a reduction to inventory. These deferred amounts are recorded as a reduction to Cost of sales as the inventory is sold.
Removed
Vendor promotional allowances provided as a reimbursement of specific, incremental and identifiable costs incurred to promote a vendor’s products are included as an offset to SG&A when the cost is incurred if the fair value of that benefit can be reasonably estimated.
Removed
Certain of the Company’s vendor agreements contain purchase volume incentives that provide for increased funding when graduated purchase volumes are met. Amounts accrued throughout the year could be impacted if actual purchase volumes differ from projected annual purchase volumes.
Removed
Periodic assessments of the accruals are performed to determine the appropriateness of the estimate and are adjusted accordingly. 30 Table of Contents Amounts received or receivable from vendors that are not yet earned are reflected initially as a reduction to inventory, which subsequently is recorded to Cost of sales.
Removed
The Company’s estimate of the portion of deferred revenue that will be realized within one year of the balance sheet date is included in Other current liabilities. Earned amounts that are receivable from vendors are included in Receivables, net, except for that portion expected to be received after one year, which is included in Other assets, net.
Removed
The Company regularly reviews the receivables from vendors to ensure they are able to meet their obligations. Historically, the change in the Company’s reserve for receivables related to vendor funding has not been significant.
Removed
Self-Insurance Reserves The Company’s self-insurance reserves consist of the estimated exposure for claims filed, claims incurred but not yet reported and projected future claims, and are established using actuarial methods followed in the insurance industry and the Company’s historical claims experience.
Removed
Specific factors include, but are not limited to, assumptions about health care costs, the severity of accidents, the incidence of illness and the average size of claims. Generally, claims for automobile and general liability and workers’ compensation take several years to settle.
Removed
The Company classifies the portion of the Company’s self-insurance reserves that is not expected to be settled within one year in Other long-term liabilities.
Removed
While the Company does not expect the amounts ultimately paid to differ significantly from the Company’s estimates, the Company’s self-insurance reserves and corresponding Cost of sales and SG&A could be affected if future claim experience differs significantly from historical trends and actuarial assumptions.
Removed
A 10% change in the Company’s self-insurance liabilities at December 28, 2024 would result in a change in expense of approximately $14.1 million for 2024.
Removed
Excess and Obsolete Inventory Reserves The Company’s excess and obsolete inventory reserve assessment includes analyzing the Company’s inventory at the SKU level by assessing each SKU quantity based on years on hand, the stage within the product lifecycle the SKU is assigned and sales history.
Removed
From this data analysis, the Company’s excess and obsolete inventory is identified, analyzed and compared against the Company’s reserve. Additionally, from time to time, specific SKUs may be identified as excess and/or obsolete for which a reserve will be recognized. The Company classifies each product into a product lifecycle category: introduction, expansion, saturation, reduction and disposition.
Removed
This assessment is routinely performed and includes, but is not limited to, the analysis of anticipated, historical and actual demand; and changes in customer preferences. SKU-level classifications are updated as warranted. Restructuring and Related Expenses The Company records restructuring and transformation activities when management commits to and approves a restructuring plan.
Removed
The components of a restructuring plan require significant management judgments and estimates that would materially impact reported performance if different assumptions were used and have a significant uncertainty in measurements. Impairment of inventory is recognized when the cost of inventory exceeds its net realizable value.
Removed
There are significant assumptions required by management to estimate the net realizable value associated with inventory located at the stores and distribution centers to be closed, including the anticipated sell through rate and estimated sales proceeds less costs to sell.
Removed
Asset impairment charges associated with operating lease right-of-use (“ROU”) assets are recognized when the ROU carrying value exceeds its fair value. There are significant assumptions required by management to estimate the fair value of ROU assets, including the market rental rates and discount rates utilized in the discounted cash flow model.
Removed
Severance and retention costs associated with workforce reductions are recognized at the time of communication to employees, unless future service is required, in which case the costs are recognized ratably over the future service period. Employee termination benefits are recognized as a liability when it is probable that a liability exists, and the amount is reasonably estimable.
Removed
Other exit-related costs, including nonrecurring professional fees, are recognized as incurred. Restructuring expenses are recognized as an operating expense in cost of sales or selling, general and administrative expenses within the consolidated statements of operations and related liabilities are recorded within accounts payable and accrued expenses on the consolidated balance sheets.
Removed
The Company periodically evaluates and, if necessary, adjusts its estimates based on currently available information. New Accounting Pronouncements For a description of recently adopted and issued accounting standards, including the expected dates of adoption and estimated effects, if any, on the consolidated financial statements, see “ Recently Issued Accounting Pronouncements” in Note 2.
Removed
Significant Accounting Policies , of the Notes to the Consolidated Financial Statements included herein. 31 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

28 edited+106 added−25 removed5 unchanged
Biggest changeThe following table includes a reconciliation of this information to the most comparable GAAP measures: 25 Table of Contents Year Ended Classification December 28, 2024 December 30, 2023 Net loss from continuing operations (GAAP) $ (586,955) $ (30,024) Cost of sales adjustments: Transformation expenses: Inventory write-down Restructuring 431,529 — Selling, general and administrative adjustments: Transformation expenses: Restructuring and other related expenses (1) Restructuring 60,682 7,835 Impairment and write-down of long-lived assets (2) Restructuring 204,156 — Distribution network optimization (3) Restructuring 19,713 — Other expenses: Other professional service fees Restructuring 15,533 — Worldpac post transaction-related expenses Restructuring 7,258 — Executive turnover Restructuring 1,561 8,152 Material weakness remediation Non-restructuring 4,579 1,438 Cybersecurity incident Non-restructuring 3,491 — Other income adjustments: TSA services (2,537) — Provision for income taxes on adjustments (4) (186,491) (4,356) Nonrecurring tax expense (5) 10,000 — Adjusted net loss (Non-GAAP) $ (17,481) $ (16,955) Diluted loss per share from continuing operations (GAAP) $ (9.80) $ (0.50) Adjustments, net of tax 9.51 0.22 Adjusted EPS (Non-GAAP) $ (0.29) $ (0.28) (1) Restructuring and other related expenses included transactional expenses due to incremental receivable reserves resulting from contract terminations with certain independents as part of the 2024 Restructuring Plan of $24.7 million, severance and other labor related costs of $15.2 million as part of the 2024 Restructuring Plan, and nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan of $20.8 million.
Biggest changeThese expenses primarily include: • Other professional service fees : Expenses relating to nonrecurring services rendered by third-party vendors engaged to perform a strategic business review, including the Company’s transformation initiatives. • Worldpac post transaction-related expenses : Expenses primarily relating to non-recurring separation activities provided by third-party professionals subsequent to the sale of Worldpac. • Executive turnover : Expenses associated with executive level reorganization, including expenses for executive severance, the hiring search for leadership positions and certain compensation benefits. • Material weakness remediation : Incremental expenses associated with the remediation of the Company’s previously-disclosed material weaknesses in internal control over financial reporting. • Cybersecurity incident : Expenses related to the response and remediation of a cybersecurity incident. • Other: Includes a non-cash charge related to expected future credit losses on vendor receivables due from a vendor that filed voluntary petitions for Chapter 11 bankruptcy protection. • Other tax adjustments : Certain tax items that are unrelated to the fiscal year in which they are recorded are excluded in order to provide a clearer understanding of the Company’s ongoing Non-GAAP tax rate and after-tax earnings. 29 Table of Contents The following table includes a reconciliation of this information to the most comparable GAAP measures (in millions): Year Ended Classification January 3, 2026 December 28, 2024 December 30, 2023 Net income (loss) from continuing operations (GAAP) $ 68 $ (587 ) $ (30 ) Cost of sales adjustments: Transformation expenses: Inventory write-down Restructuring — 431 — Distribution network optimization Restructuring 12 — — Expected future credit loss related to other receivables (1) Non-restructuring 28 — — Selling, general and administrative adjustments: Transformation expenses: Restructuring and other related expenses (2) Restructuring 88 61 8 Impairment and write-down of long-lived assets (3) Restructuring 83 204 — Distribution network optimization Restructuring 20 20 — Other expenses: Other professional service fees Non-restructuring (6) 14 15 — Worldpac post transaction-related expenses Restructuring 8 7 — Executive turnover Restructuring 5 2 8 Material weakness remediation Non-restructuring 1 5 1 Cybersecurity incident Non-restructuring — 3 — Other income adjustments: TSA services (9 ) (3 ) — Loss on extinguishment of debt 9 — — Provision for income taxes on adjustments (4) (64 ) (185 ) (4 ) Other tax (benefit) expense adjustments (5) (126 ) 10 — Adjusted net income (loss) (Non-GAAP) $ 137 $ (17 ) $ (17 ) Diluted earnings (loss) per share from continuing operations (GAAP) $ 1.13 $ (9.80 ) $ (0.50 ) Adjustments, net of tax 1.13 9.51 0.22 Adjusted diluted earnings (loss) per share (Non-GAAP) $ 2.26 $ (0.29 ) $ (0.28 ) (1) Reflects a charge for expected future credit losses related to vendor receivables due from a vendor that filed petitions for Chapter 11 bankruptcy protection on September 28, 2025.
On November 13, 2024, the Company’s Board of Directors approved the 2024 Restructuring Plan which is designed to improve the Company’s profitability and growth potential and streamline its operations. This plan anticipates closure of approximately 500 stores, approximately 200 independent locations and four distribution centers by mid-2025, as well as headcount reductions.
On November 13, 2024, the Company’s Board of Directors approved the 2024 Restructuring Plan which is designed to improve the Company’s profitability and growth potential and streamline its operations. This plan contemplated the closure of approximately 500 stores, approximately 200 independent locations and four distribution centers by mid-2025, as well as headcount reductions.
This plan is supplemental to other ongoing initiatives to simplify the Company's business and improve profitable growth and entails, among other items, certain store and independent location closures, streamlining product assortment and headcount reductions and organizational design changes to align the Company’s workforce to the expected needs of the Company's business.
This plan is supplemental to other ongoing initiatives to simplify the Company's business and improve profitable growth and included, among other items, certain store and independent location closures, streamlining product assortment and headcount reductions and organizational design changes to align the Company’s workforce to the expected needs of the Company's business.
Transformation Expenses — Expenses incurred in connection with the Company's turnaround plans and specific transformative activities related to asset optimization that the Company does not view to be normal cash operating expenses.
Transformation Expenses Expenses incurred in connection with the Company's turnaround plan and specific transformative activities related to asset optimization that the Company does not view to be normal cash operating expenses.
These expenses primarily include: • Restructuring and other related expenses — Expenses relating to strategic initiatives, including severance expense, retention bonuses offered to store-level employees to help facilitate the closing of stores, incremental reserves related to the collectibility of receivables resulting from contract terminations with certain independents associated with the 2024 Restructuring Plan and third-party professionals assisting in the development and execution of the strategic initiatives. 24 Table of Contents • Inventory write-down — Expenses relating to the incremental write-down of inventory to net realizable value due to liquidation sales and streamlining inventory assortment due to store and distribution center closures associated with the 2024 Restructuring Plan. • Impairment and write-down of long-lived assets - Expenses relating to the impairment of operating lease ROU assets and property and equipment, incremental depreciation as a result of accelerating long-lived assets over a shorter useful life, and incremental lease abandonment expenses as a result of accelerating ROU asset amortization for leases the Company expects to exit before the end of the contractual term, net of gains on lease terminations, in connection with the 2024 Restructuring Plan and Other Restructuring Plan. • Distribution network optimization — Expenses primarily relating to the conversion of the stores and distribution centers to market hubs, including temporary labor, incremental depreciation as a result of accelerating long-lived assets over a shorter useful life, nonrecurring professional service fees and team member severance.
These expenses primarily include: • Restructuring and other related expenses: Expenses relating to strategic initiatives, including severance expense, retention bonuses offered to store-level employees to help facilitate the closing of stores, incremental reserves related to the collectibility of receivables resulting from contract terminations with certain independents associated with the 2024 Restructuring Plan and fees for third-party professionals assisting in the development and execution of the strategic initiatives. • Inventory write-down: Expenses relating to the incremental write-down of inventory to net realizable value due to liquidation sales and streamlining inventory assortment due to store and distribution center closures associated with the 2024 Restructuring Plan. 28 Table of Contents • Impairment and write-down of long-lived assets : Expenses relating to the impairment of operating lease right-of-use ("ROU") assets and property and equipment, incremental depreciation as a result of accelerating long-lived assets over a shorter useful life, ROU asset amortization after store closure, and incremental lease abandonment expenses as a result of accelerating ROU asset amortization for leases the Company expects to exit before the end of the contractual term, net of gains on lease terminations, in connection with the 2024 Restructuring Plan and Other Restructuring Plan. • Distribution network optimization : Expenses primarily relating to the conversion of the stores and distribution centers to market hubs, including realized losses on liquidated inventory, temporary labor, nonrecurring professional service fees and team member severance.
Comparable store sales is intended only as supplemental information and is not a substitute for Net sales presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Closed stores are not included in the comparable store sales calculation. Comparable store sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Reconciliation of Non-GAAP Financial Measures “ M anagement’s Discussion and Analysis of Financial Condition and Results of Operations ” includes certain financial measures not derived in accordance with GAAP.
Reconciliation of Non-GAAP Financial Measures Management’s Discussion and Analysis of Financial Condition and Results of Operations, includes certain financial measures not derived in accordance with GAAP.
The Company is also pursuing efficiencies in procurement, pricing and professional and outside services, in addition to operational efficiencies. Refer to Liquidity and Capital Resources and Note 3. Restructuring for further details.
The Company is also pursuing efficiencies in procurement, pricing and professional and outside services, in addition to operational efficiencies. Refer to "Liquidity and Capital Resources" herein and Note 3.
Non-GAAP financial measures, including Adjusted Net income, Adjusted EPS, Adjusted SG&A Margin, and Adjusted Operating Income, should not be used as a substitute for GAAP financial measures, or considered in isolation, for the purpose of analyzing operating performance, financial position or cash flows.
Non-GAAP financial measures, including Adjusted Operating income, Adjusted Net income (loss), Adjusted Cost of sales, Adjusted Diluted Earnings (Loss) Per Share ("Adjusted EPS"), and Adjusted Selling, general and administrative ("Adjusted SG&A"), should not be used as a substitute for GAAP financial measures, or considered in isolation, for the purpose of analyzing operating performance, financial position or cash flows.
In addition to the “ Business and Risk Update ” section included within this Management’s Discussion and Analysis of Financial Condition and Results of Operations, these factors include, but are not limited to: • Inflationary pressures, including logistics and labor • Global supply chain disruptions • Cost of fuel • Miles driven • Unemployment rates • Interest rates • Consumer confidence and purchasing power • Competition • Changes in new car sales • Economic and geopolitical uncertainty • Increased foreign currency exchange volatility While these factors tend to fluctuate, the Company remains confident in the long-term growth prospects for the automotive parts industry. 22 Table of Contents Results of Operations The following table sets forth certain of the Company’s operating data from continuing operations expressed as a percentage of net sales for the periods indicated.
In addition to the “Business and Risk Update” section included within this Management’s Discussion and Analysis of Financial Condition and Results of Operations, these factors include, but are not limited to: • Inflationary pressures, including logistics and labor • Global trade tariffs • Global supply chain disruptions • Cost of fuel • Miles driven • Unemployment rates • Interest rates • Consumer confidence and purchasing power • Competition • Changes in new car sales • Economic and geopolitical uncertainty • Increased foreign currency exchange volatility While these factors tend to fluctuate, the Company remains confident in the long-term growth prospects for the automotive parts industry.
The Company calculates comparable store sales based on the change in store sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations. Acquired stores are included in the Company’s comparable store sales one year after acquisition.
The Company calculates comparable store sales based on the change in store sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations. The Company includes sales from relocated stores in comparable store sales from the original date of opening.
(2) During the fifty-two weeks ended December 28, 2024, the Company recorded impairment charges for ROU assets and property and equipment of $171.4 million and incremental accelerated depreciation and amortization for property and equipment and ROU assets of $32.7 million.
The Company recorded incremental accelerated depreciation and amortization for property and equipment and ROU assets of $171 million and impairment charges for ROU assets and property and equipment of $33 million, net of gains on sale, for the fifty-two weeks ended December 28, 2024.
These measures assist in comparing the Company’s current operating results with past periods and with the operational performance of other companies in the industry. The disclosure of these measures allows investors to evaluate the Company’s performance using the same measures management uses in developing internal budgets and forecasts and in evaluating management’s compensation.
The disclosure of these measures allows investors to evaluate the Company’s performance using the same measures management uses in developing internal budgets and forecasts and in evaluating management’s compensation.
Liquidity and Capital Resources Overview The Company’s primary cash requirements necessary to maintain the Company’s current operations include payroll and benefits, inventory purchases, contractual obligations, capital expenditures, payment of income taxes, funding of initiatives and other operational priorities, including payment of interest on the Company’s long-term debt.
The Company’s primary cash requirements necessary to maintain the Company’s current operations include payroll and benefits, inventory purchases, contractual obligations, capital expenditures, payment of income taxes, funding of initiatives and other operational priorities, such as restructuring and asset optimization plans.
Share Repurchase Program In August 2019, the Company’s Board of Directors approved a share repurchase program. Under the program, the Company was able to periodically repurchase shares of common stock at market prices through open market purchases effected through a broker dealer and in privately negotiated transactions.
Under the program, the Company is able to periodically repurchase shares of common stock at market prices through open market purchases effected through a broker dealer and in privately negotiated transactions. The Board of Directors is able to increase or otherwise modify, renew, suspend or terminate the share repurchase program without prior notice.
Industry Update Operating within the automotive aftermarket industry, the Company is influenced by a number of general macroeconomic factors, many of which are similar to those affecting the overall retail industry.
Restructuring, of the Notes to the Consolidated Financial Statements of this Annual Report for further details. 25 Table of Contents Industry Update Operating within the automotive aftermarket industry, the Company is influenced by a number of general macroeconomic factors, many of which are similar to those affecting the overall retail industry.
Refer to Note 7 . Long-term Debt and Fair Value of Financial Instruments of the Notes to the Consolidated Financial Statements included herein for further details.
For further details related to terms and activity for the Company's long term debt see Note 7. Long-term Debt and Fair Value of Financial Instruments, of the Notes to the Consolidated Financial Statements of this Annual Report.
Supplier Finance Programs , the Company maintains certain supplier finance programs. Bank participation and company utilization of those programs may vary based on a number of factors. If bank participation is insufficient to cover planned utilization, the Company may experience shorter payable terms for inventory than anticipated, which could impact its capital resources and capital allocation decisions.
If bank participation is insufficient to cover planned utilization, whether due to declines in the Company's credit rating or otherwise, the Company may experience shorter payable terms for inventory than anticipated, which could materially impact its cash flows, capital resources and capital allocation decisions.
The Board of Directors was able to increase or otherwise modify, renew, suspend or terminate the share repurchase program without prior notice. On February 8, 2022, the Company’s Board of Directors authorized an additional $1.0 billion toward the Company’s share repurchase program, an increase to the $1.7 billion that had previously been authorized under the program.
In February 2022, the Company’s Board of Directors authorized an additional $1.0 billion toward the Company’s share repurchase program, an increase to the $1.7 billion that had previously been authorized under the program. During fiscal 2025 and fiscal 2024, the Company did not purchase any shares of its common stock under the share repurchase program.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of the Company’s Annual Report on Form 10-K for 2023, filed with the Securities and Exchange Commission (“SEC”) on March 12, 2024, and the amended Annual Report on Form 10-K/A filed with the SEC on May 30, 2024 (collectively the “ 2023 Form 10-K”).
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for 2024, filed with the Securities and Exchange Commission (“SEC”) on February 26, 2025. Amounts are presented in millions, except per share data, unless otherwise stated.
A high-level summary of the Company’s financial results and other highlights from 2024 includes: • Net sales from continuing operations during 2024 we re $9.1 billion, a decrease of 1.2% compared wit h 2023, driven by a decrease in price and volume partially offset by a favorable product mix.
A high-level summary of the Company’s financial results and other highlights from 2025 includes: • Net sales from continuing operations during fiscal 2025 were $8.6 billion, a decrease of 5.4% compared with fiscal 2024, driven by lower sales as a result of store closures executed under the 2024 Restructuring Plan, partially offset by the impact of the 53rd week.
To achieve these improvements, the Company has undertaken planned strategic actions to help build a foundation for long-term success across the organization, which include: • The completion of the sale of Worldpac with net proceeds of approximately $1.47 billion after transaction costs and excluding the impacts of taxes; • Completing an assessment of the productivity of all assets, including company-owned stores and Carquest Independents, to achieve merchandising excellence; • The 2024 Restructuring Plan designed to improve the Company’s profitability and growth potential and streamline its operations; • Reducing costs to remain competitive while reinvesting in the frontline; • Making organizational changes to position the Company for success; and • Consolidating the Company’s supply chain.
To achieve these improvements, the Company has undertaken planned strategic actions to help build a foundation for long-term success across the organization, which include: • Completion of the optimization of our U.S. asset footprint under the 2024 Restructuring Plan; • Issuance of $1.95 billion in Senior Unsecured Notes (as defined below) and redemption of the Company's 5.90% Senior Notes due March 9, 2026; • Termination of the Company's prior revolving credit facility (the "2021 Credit Agreement"), which was replaced by a new asset-based loan revolving credit facility (the "ABL Facility"); • Performed an assessment and began initiatives to improve the productivity of all assets, including Company-owned stores and Carquest Independents; • Reducing costs to remain competitive while reinvesting in the frontline; 24 Table of Contents • Making organizational changes to position the Company for success; • Consolidating the Company’s supply chain and converting distribution centers and stores to market hubs to create economies of scale, improve service and parts availability and optimize transportation routes; and • Finalization of the sale of Worldpac in fiscal 2024 and the subsequent finalization of customary working capital adjustments in January 2026.
As a percentage of net sales, operating loss wa s 7.8%, a decrease of 827 basis points co mpared with 2023.
As a percentage of net sales, operating loss was (0.5)%, an improvement of 734 basis points compared with fiscal 2024.
However, on November 13, 2024, the Company entered into Amendment No. 5 to the 2021 Credit Agreement (as defined below), which generally prohibits open market share repurchases. During 2024 and 2023, the Company did not purchase any shares of its common stock under the share repurchase program.
Amendment No. 5 to the 2021 Credit Agreement, which was terminated on August 12, 2025 and replaced by the ABL Facility, generally prohibited open market share repurchases. As of January 3, 2026 the Company had $0.9 billion remaining available for repurchases of shares under the share repurchase program.
Comparable store sales declined 0.7%. • Gro ss profit margin from continuing operations for 2024 was 37.5% of net sales, a decrease of 444 basis points co mpared with 2023 , primarily due to inventory-related charges attributable to the location closures and streamlining product assortment resulting from the Board-approved restructuring and asset optimization plan (“2024 Restructuring Plan”). • Operating loss from continuing operations for 2024 was $713.3 million, a decrease of $752.2 million from 2023.
Comparable store sales increased 0.8%. • Gross profit margin from continuing operations for fiscal 2025 was 43.4% of net sales, an increase of 592 basis points compared with fiscal 2024, primarily due to the adverse impact on gross profit margin in fiscal 2024 from inventory-related charges under the 2024 Restructuring Plan. • Operating loss from continuing operations for 2025 was $43 million, an improvement of $670 million as compared to fiscal 2024.
(3) Distribution network optimization includes incremental depreciation as a result of accelerating long-lived assets over a shorter useful life of $5.0 million. (4) The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate in effect for the respective non-GAAP adjustments.
(4) The income tax impact of Non-GAAP adjustments is calculated using the estimated tax rate in effect for the respective Non-GAAP adjustments. (5) Income tax (benefit) expenses included a discrete non-recurring tax benefit associated with capital loss deductions effectuated in the first quarter of fiscal 2025.
This decrease was primarily attributable to gross margin decline and the impairment of long-lived assets due to the 2024 Restructuring Plan. • Cash flows provided by operating activities from continuing operations was $140.5 million during 2024, a decrease of 0.9% c ompared with 2023, primarily attributable to an increase in net working capital offset by lower net income and provision for deferred income taxes compared with 2023 prior year. • Diluted earnings per share (“Diluted EPS”) from continuing operations was a loss of $9.80 during 2024 compared with a loss of $0.50 in 2023. 21 Table of Contents Refer to “ Results of Operations ” and “ Liquidity and Capital Resources ” for further details on the Company’s results.
This change was primarily attributable to lower restructuring and related expenses in fiscal 2025 compared to 2024, including inventory-related charges related to the 2024 Restructuring Plan. • Cash flows used in operating activities from continuing operations was $46 million during fiscal 2025, a decrease of 132.6% compared with fiscal 2024, primarily attributable to a reduction in our accounts payable and cash charges related to the 2024 Restructuring Plan. • Diluted earnings per share (“Diluted EPS”) from continuing operations resulted in earnings of $1.13 during 2025 compared with a loss of $9.80 in 2024.
As a result of the 2024 Restructuring Plan, the Company incurred $680.8 million of restructuring expenses in 2024.
Restructuring Activities On November 13, 2024, the Company’s Board of Directors approved the 2024 Restructuring Plan which is designed to improve the Company’s profitability and growth potential and streamline its operations. As a result of the 2024 Restructuring Plan, the Company incurred $159 million and $680 million of restructuring expenses in fiscal 2025 and fiscal 2024, respectively.
Removed
Amounts are presented in thousands, except per share data, unless otherwise stated. Management Overview On August 22, 2024, the Company entered into a definitive purchase agreement to sell Worldpac, and on November 1, 2024, the Company completed the sale. As a result, Worldpac was presented as discontinued operations beginning in the third quarter of 2024.
Added
Item 7. Management ’ s Discussion a nd Analysis of Financial Condition and Results of Operations. The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Company’s consolidated financial statements and related notes that appear elsewhere in this Annual Report.
Removed
Unless otherwise noted, the discussion below relates to the Company’s continuing operations.
Added
The Company’s discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as the Company’s plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the section titled “Part I.
Removed
Year Ended 2024 vs. 2023 $ Change Basis Points 2023 vs. 2022 $ Change Basis Points (in millions) December 28, 2024 December 30, 2023 December 31, 2022 Net sales $ 9,094.3 100.0 % $ 9,209.1 100.0 % $ 9,148.9 100.0 % $ (114.8) — $ 60.2 — Cost of sales (1) 5,685.8 62.5 5,349.0 58.1 4,916.0 53.7 336.8 443.7 433.0 435.0 Gross profit 3,408.5 37.5 3,860.1 41.9 4,232.9 46.3 (451.6) (443.7) (372.8) (435.0) SG&A exclusive of restructuring and related expenses 3,812.9 41.9 3,805.2 41.3 3,708.3 40.5 7.7 60.6 96.9 78.8 Restructuring and related expenses 308.9 3.4 16.0 0.2 — — 292.9 322.3 16.0 17.4 SG&A 4,121.8 45.3 3,821.2 41.5 3,708.3 40.5 300.6 382.9 113.0 96.2 Operating (loss) income (713.3) (7.8) 38.9 0.4 524.6 5.7 (752.2) (826.6) (485.8) (531.2) Interest expense (81.0) (0.9) (88.0) (1.0) (50.8) (0.6) 7.0 6.4 (37.1) (40.0) Loss on debt extinguishment — — — — (7.4) (0.1) — — 7.4 8.1 Other income (expense), net 26.2 0.3 1.9 0.0 (6.2) (0.1) 24.3 26.8 8.1 8.8 Provision for income taxes (181.1) (2.0) (17.2) (0.2) 99.7 1.1 (163.9) (180.6) (116.8) (127.6) Net (loss) income from continuing operations $ (587.0) (6.5) % $ (30.0) (0.3) % $ 360.5 3.9 % $ (557.0) (612.8) $ (390.6) (426.7) Note: Table amounts may not foot due to rounding.
Added
Item 1A. Risk Factors” of this Annual Report. The discussion of the Company’s financial condition and changes in the Company’s results of operations, liquidity and capital resources for the fiscal year ended December 28, 2024 (“2024”) compared with the fiscal year ended December 30, 2023 (“2023”) has been omitted from this Form 10-K, but are included in “Item 7.
Removed
(1) Cost of sales includes $431.5 million of inventory-related charges attributable to the location closures and streamlining product assortment resulting from the 2024 Restructuring Plan. Net Sales Net sales for 2024 were $9.1 billion , a decline o f $114.7 million, or 1.2%, co mpared with 2023.
Added
Management Overview The Company's results from continuing operations for the fiscal year ended January 3, 2026 included the benefit of one additional week (the "53rd week") as compared to the fiscal year ended December 28, 2024, which contained 52 weeks.
Removed
Net sales was negatively impacted by strategic pricing investments coupled with volume decline, partially offset by favorable product mix. Comparable store sales declined 0.7%. Category growth was led by batteries, filters and engine management.
Added
Refer to “ Results of Operations ” and “ Liquidity and Capital Resources ” of this Annual Report for further details on the Company’s results.
Removed
The Company includes sales from relocated stores in comparable store sales from the original date of opening. Closed stores and stores in process of closing under the 2024 Restructuring Plan are not included in the comparable store sales calculation.
Added
In the third quarter of fiscal 2025, one of the Company’s vendors, a leading auto parts supplier for the automotive aftermarket industry, filed voluntary petitions for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the Southern District of Texas.
Removed
Gross Profit Gross profit in 2024 was $3.41 billion, or 37.5% of net sales, compared with $3.86 billion, or 41.9% of net sales in 2023, a decrease of 444 basis points .
Added
The vendor has secured short-term financing through a debtor-in-possession (“DIP”) loan, however, Chapter 11 proceedings carry inherent risks with respect to a company’s ability to continue operations and maintain adequate liquidity to satisfy current and future obligations.
Removed
Gross profit as a percentage of net sales declined primarily due to $431.5 million of inventory-related charges attributable to the location closures and streamlining product assortment associated with the 2024 Restructuring Plan and liquidation sales at closing stores and distribution center locations. 23 Table of Contents Selling, General and Administrative Expenses, Exclusive of Restructuring and Related Expenses Selling, general and administrative (“SG&A”) expenses, exclusive of restructuring expenses for 2024 was $3.81 billion, or 41.9% of net sales, compared with $3.81 billion, or 41.3% of Net sales for 2023, an increase of 61 basis points.
Added
As a result of these events, the Company recorded a non-cash charge of $28 million to cost of sales in the third quarter of fiscal 2025, reflecting estimated future credit losses on certain vendor receivables due from the vendor.
Removed
T he increase in SG&A expense as a percentage of net sales was primarily driven by higher labor-related costs attributable to wage-investments in frontline team members and occupancy costs partially offset by a decline in marketing expenses. Restructuring and Related Expenses Restructuring and related expenses for 2024 was $308.9 million, or 3.4% of net sales.
Added
The estimate was developed utilizing a probability weighted cash-flow model adjusted for risks associated with credit risk deterioration for companies that enter Chapter 11 bankruptcy proceedings. The Company may continue to source some products from the vendor, but such purchases are not material to the Company.
Removed
These expenses represent costs primarily attributable to the 2024 Restructuring Plan and included $204.2 million of long-lived asset impairment and accelerated amortization and depreciation charges, $19.7 million of distribution network optimization, $24.7 million of incremental reserves of the collectibility of receivables resulting from contract terminations with independents, $15.2 million severance and other labor related expenses and third party professional fees.
Added
In early fiscal 2025, new global trade tariffs were imposed on imports to the U.S., including additional tariffs on various countries from which the Company directly or indirectly imports and/or sources merchandise, including Canada, China and Mexico, among others.
Removed
Refer to Note 3. Restructuring of the Notes to the Consolidated Financial Statements included for additional detail. Interest Expense Interest expense for 2024 was $81.0 million, a decrease of $7.0 million co mpared with 2023. This decrease was attributable to an increase in interest income due to higher investment balances compared with the prior year .
Added
Since the initial announcement in the first quarter of fiscal 2025, various modifications and delays to the U.S. tariffs have been announced and further changes are expected to be made in the future, which may include additional sector-based tariffs or other measures. In response to the tariffs, certain of our suppliers have increased prices.
Removed
Provision for Income Taxes The Company’s Provision for income taxes for 2024 was a benefit of $181.1 million compared with a benefit of $17.2 million for 2023, an increase of $164.0 million primarily due to a decrease in taxable income. The Company’s effective tax rate was 23.6% for 2024 and 36.4% for 2023. In 2024.
Added
However, the impact of such increases to-date has not been material to the Company’s business, financial condition and results of operations, in-part as a result of certain price increases being passed-through to our customers.
Removed
The tax rate decreased compared with prior year primarily due to a tax benefit resulting from a discrete charge related to share-based compensation, the expiration of statute of limitations for certain tax years in multiple states as well as enhanced utilization of tax credits in the current year.
Added
On November 1, 2024, the Company completed the sale of the Worldpac business for net proceeds of approximately $1.44 billion (excluding the impact of taxes) after transaction costs and application of the final working capital adjustment recorded in the fourth quarter of fiscal 2025.
Removed
These expenses primarily include: • Other professional service fees — Expenses relating to nonrecurring services rendered by third-party vendors engaged to perform a strategic business review, including the Company’s transformation initiatives. • Worldpac post transaction-related expenses — Expenses primarily relating to non-recurring separation activities provided by third-party professionals subsequent to the sale of Worldpac. • Executive turnover — Expenses associated with the hiring search for leadership positions and compensation. • Material weakness remediation — Incremental expenses associated with the remediation of the Company’s previously-disclosed material weaknesses in internal control over financial reporting. • Cybersecurity incident— Expenses related to the response and remediation of a cybersecurity incident.
Added
Results of Operations The following table sets forth certain of the Company’s operating data from continuing operations expressed as a percentage of net sales for the periods indicated: Year Ended ($ in millions) January 3, 2026 December 28, 2024 Change (1) Basis Points Net sales $ 8,601 100.0 % $ 9,094 100.0 % $ (493 ) — Cost of sales (2) 4,868 56.6 5,685 62.5 817 (592 ) Gross profit 3,733 43.4 3,409 37.5 324 592 Selling, general and administrative expenses, exclusive of restructuring and related expenses 3,572 41.5 3,813 41.9 241 (40 ) Restructuring and related expenses 204 2.4 309 3.4 105 (103 ) Selling, general and administrative expenses 3,776 43.9 4,122 45.3 346 (142 ) Operating loss (43 ) (0.5 ) (713 ) (7.8 ) 670 734 Interest expense (139 ) (1.6 ) (81 ) (0.9 ) (58 ) (73 ) Other income, net 91 1.1 26 0.3 65 77 Income tax benefit (159 ) (1.8 ) (181 ) (2.0 ) (22 ) 14 Net income (loss) $ 68 0.8 % $ (587 ) (6.5 )% $ 655 725 (1) Represents favorable (unfavorable) year over year change (2) Cost of sales in fiscal 2024 includes $431 million of inventory-related charges attributable to the location closures and streamlining product assortment resulting from the 2024 Restructuring Plan.
Removed
Nonrecurring Tax Expense — Income tax incurred by the Company from the book to tax basis difference in the Worldpac Canada stock directly resulting from the sale of Worldpac.
Added
Note: Table amounts may not foot due to rounding. Net Sales For the fifty-three weeks ended January 3, 2026, net sales decreased 5.4% and comparable store sales increased 0.8% compared with the fifty-two weeks ended December 28, 2024.
Removed
(5) Income tax incurred by the Company from the book to tax basis difference in the Worldpac Canada stock directly resulting from the sale of Worldpac.
Added
The decline in net sales as compared with the prior period, was due to lower sales as a result of store closures executed under the 2024 Restructuring Plan, partially offset by the impact of the 53rd week. 26 Table of Contents Comparable store sales for the fourth quarter and year ended January 3, 2026 excludes net sales for the 53rd week.
Removed
Historically, the Company has also used available funds to repay borrowings under the Company’s credit facility, to periodically repurchase shares of the Company’s common stock under the share repurchase program, to pay the Company’s quarterly cash dividend and for acquisitions. The Company also anticipates using cash in connection with its restructuring and asset optimization plan.
Added
For example, our comparable sales results for 2025 compares weeks 1 through 52 in fiscal 2025, to the 52-week period reported for fiscal 2024.
Removed
The Company’s future uses of cash may differ, including with respect to the weight the Company places on the preservation of cash and liquidity, degree of investment in the Company’s business and other capital allocation priorities. 26 Table of Contents Typically, the Company has funded its cash requirements primarily through cash generated from operations, supplemented by borrowings under the Company’s credit facilities and note offerings as needed.
Added
Gross Profit For the fifty-three weeks ended January 3, 2026, and the fifty-two weeks ended December 28, 2024, gross profit was $3.7 billion, or 43.4% of net sales, and $3.4 billion or 37.5% of net sales, respectively.
Removed
Funds generated from the Company’s expected results of operations, available cash and cash equivalents and available borrowings under its credit facility will be sufficient to fund its obligations for the next year.
Added
The increase in gross profit as a percentage of net sales compared to the fifty-two weeks prior comparative period was due to $431 million of inventory-related charges and liquidation sales associated with the 2024 Restructuring Plan, which negatively impacted the comparative period, as well as more favorable product margins in fiscal 2025, driven by strategic sourcing and pricing initiatives and lower supply chain and other related costs.
Removed
The Company also believes such funds, cash and available borrowings, together with our ability to generate cash through credit facilities and notes offerings as needed, will be sufficient to fund our obligations long-term. Cash requirements for obligations next year and beyond are discussed in the “ Contractual and Off Balance Sheet Obligations ” section below.
Added
This was partially offset by lower-margin liquidation sales associated with the 2024 Restructuring Plan in the first quarter of fiscal 2025 and a $28 million non-cash charge for expected future credit losses related to vendor receivables due from a vendor that filed petitions for Chapter 11 bankruptcy protection on September 28 2025.
Removed
On August 22, 2024, the Company entered into a definitive purchase agreement to sell its Worldpac business for $1.5 billion, with customary adjustments for working capital and other items, as well as provision of letters of credit in an aggregate amount of up to $200 million for up to 12 months following the closing of the transaction, which letter of credit exposure will reduce to zero no later than 24 months after the closing, to support supply chain financing for the buyer.
Added
Total gross profit dollars were also impacted year-over-year as a result of store closures during the year under our 2024 Restructuring Plan offset by favorability from the 53rd week.
Removed
The transaction closed on November 1, 2024. Net proceeds from the transaction after paying expenses and excluding the impact of taxes were approximately $1.47 billion. The Company intends to use net proceeds from the transaction for general corporate purposes, which may include the provision of additional working capital, funding internal operational improvement initiatives and repayment or refinancing of outstanding indebtedness.
Added
Selling, General and Administrative Expenses, Exclusive of Restructuring and Related Expenses For the fifty-three weeks ended January 3, 2026, selling, general and administrative ("SG&A") expenses, exclusive of restructuring and related expenses, were $3.6 billion, or 41.5% of net sales, compared with $3.8 billion, or 41.9% of net sales, for the fifty-two weeks ended December 28, 2024.
Removed
The Company believes funds generated from its expected results of operations, available cash and cash equivalents, net proceeds from the Worldpac sale and available borrowings under credit facilities and note offerings as needed will be sufficient to fund its obligations for the next twelve months and beyond.
Added
Overall SG&A expenses decreased for the fifty-three weeks ended January 3, 2026, as compared to the fifty-two weeks ended December 28, 2024, as a result of store closures executed under the 2024 Restructuring Plan reducing overhead and operating costs, offset by higher medical, insurance and marketing costs.
Removed
The Company estimates that it will incur additional expenses of approximately $225.0 million to $275.0 million including $200.0 million to $250.0 million of cash expenses primarily composed of lease termination and other exit expenses and professional services, by the end of fiscal year 2025. As further described in Note 1 8 .
Added
SG&A expenses as a percentage of net sales for the fifty-two weeks ended December 28, 2024, benefited from a net gain on asset sales, see Note 9. Leases and Other Commitments, of the Notes to the Consolidated Financial Statements in this Annual Report.
Removed
The Company had $947.3 million remaining under the share repurchase program as of December 28, 2024. Refer to “
Added
Restructuring and Related Expenses For the fifty-three weeks ended January 3, 2026, restructuring and related expenses were $204 million or 2.4% of net sales, compared to $309 million, or 3.4% of net sales, for the fifty-two weeks ended December 28, 2024.
Added
The decrease in expenses as compared to the same period in fiscal 2024, relates to the timing of the Company's 2024 Restructuring Plan which was announced during the fourth quarter of fiscal 2024. The expenses principally relate to lease terminations, professional services, severance and termination costs and other exit costs.
Added
The Company estimates that it will incur additional expenses of approximately $30 million to $40 million through fiscal 2026, substantially all of which is expected to be cash expenses, primarily composed of lease and termination costs associated with closed stores and distribution center leases. See Note 3. Restructuring, of the Notes to the Consolidated Financial Statements of this Annual Report.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Company is exposed to foreign currency exchange rate fluctuations for the portion of its inventory purchases denominated in foreign currencies. The Company believes that the price volatility relating to foreign currency exchange rates is partially mitigated by the Company’s ability to adjust selling prices. During 2024 and 2023, foreign currency transactions did not materially impact net income. Item 8.
Biggest changeThe Company believes that the price volatility relating to foreign currency exchange rates is partially mitigated by the Company’s ability to adjust selling prices. During fiscal 2025 and fiscal 2024, foreign currency exchange rate fluctuations did not materially impact net income. 36 Table of Contents Item 8. Financial Statements and Supplementary Data. This information is included in Item 15.
Financial Statements and Supplementary Data. This information is included in “ Item 15. Exhibits, Financial Statement Schedules ” of this annual report and is incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.
Financial Statement Schedules, Exhibits., of this Annual Report and is incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.
The Company’s concentration of credit risk is limited because the Company’s customer base consists of a large number of customers with relatively small balances, which allows the credit risk to be spread across a broad base. The Company has not historically had significant credit losses.
The Company is exposed to normal credit risk from customers. The Company’s concentration of credit risk is limited because the Company’s customer base consists of a large number of customers with relatively small balances, which allows the credit risk to be spread across a broad base. See Note 6.
Removed
Item 7A. Quantitative and Qualitative Disclosures about Market Risks. The Company is subject to interest rate risk to the extent the Company borrows against its revolving credit facility as it is based, at the Company’s option, on adjusted Term Secured Overnight Financing Rate (“SOFR”) plus a margin, or an alternate base rate plus a margin.
Added
Item 7A. Quantitative and Qualitati ve Disclosures about Market Risks. Interest rates on all of the Company’s long-term debt, inclusive of the 2025 Senior Unsecured Notes, are fixed and not subject to interest rate risk.
Removed
As of December 28, 2024 and December 30, 2023, the Company had no borrowings outstanding under its revolving credit facility. The Company’s financial assets that are exposed to credit risk consist primarily of trade accounts receivable and vendor receivables. The Company is exposed to normal credit risk from customers.
Added
Future borrowings, if any, under the Company’s new ABL Facility may be exposed to interest rate risk as interest on future borrowings under the ABL Facility accrue interest based on either (i) SOFR plus an applicable margin or (ii) an alternative base rate plus an applicable margin.
Added
As of January 3, 2026, the Company had no borrowings outstanding under its ABL Facility. The Company also generates interest income on cash and cash equivalents. These interest rates are subject to changes in market conditions.
Added
There was a material increase in the Company’s cash and cash equivalents during the third quarter of 2025, due to the net proceeds received from the issuance of the 2025 Senior Unsecured Notes and redemption of the previously outstanding 5.90% Senior Notes due 2026.
Added
A hypothetical 100 basis points change in interest rates would have an annualized impact of approximately $31 million based on our balance of cash and cash equivalents as of January 3, 2026. The Company’s financial assets that are exposed to credit risk consist primarily of trade accounts receivable and vendor receivables.
Added
Receivables, net of the Notes to the Consolidated Financial Statements of this Annual Report for additional information related to the Company's credit losses. The Company is exposed to foreign currency exchange rate fluctuations for the portion of its inventory purchases denominated in foreign currencies.

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