LKQ · 10-Q · 2026Q3 · Full report
Gross Margin Drivers
LKQ CORP · 2026-10-29 · Importance 31 · Surprise 32 · In source text
Consolidated cost of goods sold rose to 62.8% of revenue in the third quarter of 2026 from 61.7% a year earlier, reducing gross margin to 37.2% from 38.3%. For the first nine months, cost of goods sold increased to 61.9% of revenue from 61.2%, as North America and Europe each had a 0.3 percentage-point increase. Europe’s third-quarter gross margin percentage fell 2.2 points to 36.6% due to fixed distribution cost deleverage, lower vendor rebates, and inflation not fully offset by pricing; its nine-month margin declined 0.6 points to 38.1%.
Key facts
- LKQ's nine-month 2026 cost of goods sold decreased $21 million, or 0.3%, to $6,308 million, including a $111 million unfavorable impact from a weakening U.S. dollar. source
- Europe's nine-month 2026 gross margin decreased $113 million, or 6.1%, to $1,726 million, partly offset by a $63 million foreign-exchange increase; gross margin percentage declined 0.6%. source
- Europe's three-month 2026 gross margin decreased $97 million, or 15.4%, to $532 million; gross margin percentage fell 2.2% due to lower-revenue fixed-cost deleverage, lower vendor rebates, and inflation not fully offset by pricing. source
- LKQ's three-month 2026 cost of goods sold decreased $75 million, or 3.5%, to $2,083 million and included an $18 million favorable impact from a strengthening U.S. dollar. source
- North America's nine-month 2026 gross margin decreased $16 million, or 0.9%, to $1,828 million due to inflationary cost increases, lower volumes, and unfavorable customer mix, partly offset by pricing and higher other revenue. source
- Specialty's nine-month 2026 gross margin increased $7 million, or 2.4%, to $334 million, driven by higher parts and services revenue and tariff refunds, partly offset by acquisition of a lower-margin business. source
- North America's three-month 2026 gross margin decreased $4 million, or 1.0%, to $594 million, primarily due to lower volumes, partly offset by higher other revenue. source
- Specialty's three-month 2026 gross margin decreased $4 million, or 2.4%, to $110 million, primarily because of the acquisition of a lower-margin business in the second quarter of 2026. source
Impact estimates
| metric | direction | stage | expected | basis |
|---|---|---|---|---|
| operating_income | negative | realized | -3.4% | Europe's nine-month 2026 gross margin decreased $113 million, or 6.1%, to $1,726 million, partly offset by a $63 million foreign-exchange… |
| operating_income | negative | realized | -2.9% | Europe's three-month 2026 gross margin decreased $97 million, or 15.4%, to $532 million; gross margin percentage fell 2.2% due to… |
| margin | negative | realized | -2.2% | Europe's three-month 2026 gross margin decreased $97 million, or 15.4%, to $532 million; gross margin percentage fell 2.2% due to… |
| operating_income | positive | realized | +0.6% | LKQ's nine-month 2026 cost of goods sold decreased $21 million, or 0.3%, to $6,308 million, including a $111 million unfavorable impact… |
| margin | negative | realized | -0.6% | Europe's nine-month 2026 gross margin decreased $113 million, or 6.1%, to $1,726 million, partly offset by a $63 million foreign-exchange… |