2020 Highlights

Stores and Branches* Total Net Sales in 2020 Returned to Shareholders in 2020 through the combination of Share Repurchases and the Company’s Quarterly Dividend 2020 HIGHLIGHTS CARE + SPEED – We responded quickly with innovations to serve our customers as the pandemic took hold in North America. • Branded Advance Same DayTM – a customer-centric suite of same day services that includes Free In Store Pickup, Free Curbside and Free Same Day Delivery. • Launched our mobile app for fast, simple shopping. • Developed virtual instructor-led training courses for DIEHARD IS BACK – We officially launched repair shop owners and their employees to assist our DieHard® batteries in all Advance stores and participating professional customers. Carquest independent locations during July 2020. Our #DieHardisBack campaign increased Advance’s brand awareness and category sales throughout the second half of the* AS year,OF JANUARY leading 2, 2021 DieHard THE COMPANY to be ALSO a billion-dollar SERVES 1,277 INDEPENDENT business. CARQUEST BRANCHES. Watch the film at www.youtube.com/advanceautoparts. * As of January 2, 2021 the Company also serves 1,277 Independent Carquest locations . DEAR FELLOW ADVANCE AUTO PARTS SHAREHOLDERS I hope each of you are safe and healthy as we start 2021 under the unique circumstances the world has faced over the past year. As I write this letter, I am reminded that it was at this time just one year ago that we were in the final stages of planning the launch of our newly acquired DieHard® brand. At that time, we certainly had no idea of what was to come in 2020. I found a quote recently that I feel summarizes my personal experience over this timeframe – “Nothing in life is to be feared; it is only to be understood. Now is the time to understand more, so that we may fear less.” This quote came from the great scientist Marie Curie. The resiliency we have demonstrated this past year has put Advance in a strong position to weather the current crisis and build long-term value for all stakeholders. I am so grateful to our team members for all their hard work in 2020, and I have never been so optimistic for the future. – TOM GRECO President and Chief Executive Officer Without a doubt, it has been a year in which ultimately led to improved results. Our entire understanding more about something took on organization rose to the occasion as we remained a whole new meaning. Before 2020, I believed focused on three overarching priorities to address global pandemics that could threaten every man, the rapidly evolving situation. woman and child on Earth for months on end were a part of our history books. Such threats seemed FIRST, we have prioritized the health, safety and to belong more in the days of Madame Curie wellbeing of our team members and customers. herself when cholera and the flu gripped the world This was not a new concept at AAP, but it has taken at different times in her life. We certainly had no on new meaning in the face of the crisis. From the playbook for COVID-19. It had to be built from onset of the pandemic, we responded quickly in understanding how the virus would impact our DIY our stores and distribution centers to implement consumers, professional customers, independent social distancing, enhance sanitation practices, partners, suppliers and AAP team members. It require mandatory employee face coverings and has been a valuable reminder of the tremendous install plexiglass barriers. We also made critical importance of deeply understanding trends that changes to how our team members operated are impacting consumer and employee behavior. and mandated health check screenings. For our Working diligently to improve their respective customers, we brought innovative solutions to experiences has been and always will be the best market to ensure personal safety like our Advance response to any challenging environment we face. Same Day™ suite of fulfillment options for our DIY omnichannel customers. For our professional Indeed, we witnessed abrupt changes in consumer customers, we introduced contactless services behavior that required rapid adjustments to our to deliver parts in a way that reduced human standard operating procedures in response to interaction and adhered to unique protocols COVID-19. Our response was swift, focused and individual repair shops put in place. As a result of — continued our actions and investments, our infection rates Our commitment to these priorities has been across the company have been significantly below mirrored at all levels of the company as our team the national average. members worked tirelessly to adapt to our evolving pandemic protocols. They too continued to be SECOND, during the crisis, we’ve stayed laser- innovative and resourceful, accommodating new focused on delivering sales, operating earnings and ways of serving our customers safely and efficiently. protecting the financials of the company. Initially, as It is their efforts which have allowed Advance to we faced many unknowns, this included preserving effectively respond to the increased demand, while cash. Late in the first quarter, we launched a series also executing on our strategic objectives. of initiatives to achieve these goals and made ongoing refinements to strengthen our plans as the Before taking a closer look at the financial highlights pandemic unfolded. Shortly after the pandemic hit, of the year, I want to thank each of our team we added $1 billion in liquidity to the balance sheet members and Independent partners for their hard and temporarily suspended our share repurchase work throughout the past twelve months. I am activity. These important steps solidified our cash particularly humbled by how the company has position and helped us weather the initial storm come together throughout this challenging time. while creating an environment for positive recovery. We have continued to do our part to keep motorists, Our rapid actions drove results. From the second including essential frontline workers, on the road quarter through the end of 2020, we delivered 9.6% and without them, we certainly would not have been in net sales growth, 44 weeks of consecutive DIY able to deliver the performance described below. market share gains, 160 basis points in adjusted operating income margin expansion and 32.4% FINANCIAL HIGHLIGHTS adjusted earnings per share growth. As the year progressed and our sales began to rebound from trough levels, we resumed our share repurchase While 2020 was a highly volatile year, in the end, program. In fact, we ended 2020 by returning we grew sales, operating income and DIY market approximately $515 million to shareholders share resulting in record earnings per share. through a combination of these repurchases and Following a sharp decline in sales early in the year, the company’s quarterly cash dividend payments. demand for auto parts, particularly within our DIY omnichannel business, rebounded significantly in THIRD, we prepared Advance to be stronger over the last three quarters of the year. This was largely the long term following this crisis. We spent several driven by the impact COVID-19 had on the economy months last summer reviewing our strategic and changes in consumer behavior. For the first plan initiatives through a “Post COVID-19 Lens.” time in our history, Advance surpassed $10 billion This resulted in the reprioritization of certain in net sales, which was a 4.1% increase from 2019 projects and updated targets for others in order results. Adjusted operating income of $827 million to respond and thrive in the new environment we increased 4.1% versus the prior year in spite of are competing in. The challenges of the pandemic approximately $60 million of unplanned expense also resulted in an intensification of our focus on attributable to COVID-19. Our continued focus on communication, innovation and training. I believe cash has led to a 302-basis point improvement this is building a stronger culture and execution in our Accounts Payable Ratio, leading us to set mindset overall. The goal of our updated strategic a new record for free cash flow of $702 million, plan is to drive top quartile shareholder returns up 18% versus 2019. Throughout this uncertain over the next three years through top-line growth period, we remained committed to both investing at or above the market, an acceleration of margin in our business and returning value directly to expansion and a capital allocation strategy shareholders through our quarterly cash dividend focused on returning cash to shareholders. and share repurchase program. — continued From a channel perspective, our industry clearly now have an increased appreciation for the benefitted in 2020 from accelerated DIY growth. broad set of tools we offer to help make their That said, our results would not have been businesses successful. This extends beyond our possible without our successful launch of the industry leading product assortment and now iconic DieHard brand, which we purchased at the includes virtual instructor led trainings for repair end of 2019 and officially launched in our stores shop owners and their technicians, contact free in July 2020. I believe our DIY market share delivery of parts and new tools like MotoLogic®. gains were the result of our DieHard launch and As the economy began to open in the back half of relentless focus on improved store execution, the year, we saw a gradual recovery in both miles enhanced brand awareness and increased driven and our professional business. customer loyalty. In addition, the launch of our Throughout 2020, we also continued to drive our Advance Same Day suite of services and mobile four pillars of margin expansion. This resulted in app contributed to increased differentiation. gross margin improvement of 38 basis points Meanwhile, our Speed Perks loyalty program and for the year as a result of supply chain leverage, improved digital platforms, contributed to double increased owned brand penetration and strategic digit year-over-year sales growth in e-commerce.

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