Shares of Advance Auto Parts (AAP) plummeted 5.08% in intraday trading on Thursday, despite the company reporting better-than-expected third-quarter earnings. The auto parts retailer posted adjusted earnings of $0.92 per share, surpassing analysts' expectations of $0.75 per share.

While Advance Auto Parts beat earnings estimates, its revenue of $2.04 billion narrowly missed the consensus forecast of $2.07 billion. The company reported a 3% increase in comparable store sales for the quarter, which was driven by growth in both its Pro and DIY channels. Gross profit margin improved to 43.3% from 42.3% in the same period last year.

Despite the positive earnings surprise, investors appeared concerned about the company's full-year outlook. Advance Auto Parts narrowed its full-year 2025 adjusted earnings per share guidance to $1.75-$1.85, up from a previous range of $1.20-$2.20. The company also raised its full-year sales forecast to $8.55 billion-$8.60 billion from $8.40 billion-$8.60 billion.

CEO Shane O'Kelly commented on the results, stating, "We delivered our strongest quarterly performance in over two years, thanks to the team's determination, commitment to our turnaround objectives, and their dedication to serving our customers." However, O'Kelly also noted that the company is monitoring the health of low- and middle-income consumers, acknowledging that they are adjusting their budgets in response to the inflationary environment.

The stock's decline may reflect investor concerns about the broader auto parts sector, including recent bankruptcies and alleged fraud among car dealers, lenders, and parts businesses. Additionally, the company recorded a $28 million non-cash charge to cost of sales in Q3, citing risks associated with the bankruptcy proceedings of a supplier.