Monro Plans To Consolidate Its Nine Retail Banners Into Five Regional ‘Power Brands’

Monro Inc. (Rochester, NY) recently marked the one-year anniversary of management’s “Monro Forward” strategy. President and CEO Brett Ponton told analysts on the company’s May 21 quarterly report conference call that the execution of this strategy was instrumental in driving momentum and creating a scalable platform for future growth.

“Our efforts to enhance customer satisfaction have led to a dramatic improvement in our online reputation, as evidenced by our average 4.8-star rating during the [fiscal fourth quarter ended March 30, 2019] — the highest quarterly star rating received to date, which brings our all-time average star rating to 4.5 stars, as compared to 3.6 stars before we started the rollout of our customer survey and online review program,” Ponton pointed outed.

He added that a clear and consistent selling approach — coupled with stronger merchandising strategy across good/better/best product options — drove higher in-store conversion in the quarter.

“We also established clear brand standards to align and modernize the appearance of our stores, while driving further consistency across our locations that currently includes a wide range of stores and formats,” Ponton said on the call. “As many of you know, we’ve acquired several regional brands over the years.”

BRAND CONSOLIDATION … As part of management’s broader store refresh initiative, the company plans to consolidate its existing nine retail banners into five regional “power brands.” This also will include converting service locations to tire shops when demographics favor that format.

“Our service stores generate approximately $600,000 in annualized sales, while our tire stores generate approximately $1.20 million in sales. Additionally, tires make up a significant portion of the automotive aftermarket,” Ponton pointed out. “By optimizing brand awareness and banner concentration in targeted markets, we can increase our sales and relevancy in the marketplace without sacrificing service revenue.

“Last year, we piloted this rebranding strategy at a district in the Mid-Atlantic, shifting a few select stores to a tire-oriented brand. We are pleased to report that these pilot stores are showing a meaningful improvement in both conversion and traffic. Importantly, the results of this pilot program were in line with the forecast of our analytics model, which gives us confidence in the execution of our brand consolidation strategy going forward.”

The overarching goal is to increase brand awareness in regional markets, to align store banners with market demand and to optimize growth, specifically where opportunities exist for higher tire sales.

STORE REFRESH … Ponton noted that management is encouraged by the early results of its store refresh initiative and the opportunities that lie ahead. “Following the successful refresh of 31 pilot stores in Rochester, NY during the third quarter, we’re very pleased to see that the implementation of our Monro playbook and the completion of our stores’ reimaging has led to a sequential improvement in traffic and comparable-store sales trends at these stores from the third quarter to the fourth quarter of fiscal 2019,” he told analysts on the call. Additionally, we have experienced meaningful improvement across every customer experience metric at these stores.”

He said Monro has begun to scale this initiative, starting with the refresh of roughly 50 stores in its southern markets in the first quarter of fiscal 2020. “We plan on rolling out our brand operational standards across our store base and modernizing our store portfolio over the next three to five years,” Ponton stated.

He added that the company will prioritize newly acquired stores, noting that the implementation of standardized in-store operating procedures and brand standards benefits the integration process and drives higher returns.

GROWTH … Ponton told analysts that acquisitions remain a core pillar of Monro’s growth strategy. “We have made significant strides in diversifying and strengthening our store footprint with the completion of our previously announced acquisition of 40 Certified Tire & Service Center stores and one distribution center in California,” he said. “This acquisition expands our geographic footprint to the West Coast and provides us with a strong platform for further expansion into a dynamic and attractive region.

“We have expanded our team, including hiring a West Coast head of operations, and established a proper corporate infrastructure to support our California operations, demonstrating our commitment to securing a solid foundation for growth in this region.”

Ponton added that these actions position Monro to capitalize on future opportunities in this market. “In addition, as part of our larger brand consolidation effort, … we will be rebranding these stores under the Tire Choice Auto Service Centers banner,” he said.

Monro also has completed the previously announced acquisition of 12 shops in Louisiana — a move that occurred early in the first quarter of fiscal 2020 — expanding the company’s footprint in another new state and building out its geographical presence in the South.

“Our M&A pipeline remains robust with over 10 [non-disclosure agreements (NDAs)] signed with opportunities ranging from five to 40 stores,” Ponton said.

He also noted that the company has extended its revolving credit facility “to continue to take advantage of further consolidation opportunities” and that the continued execution of management’s “Monro Forward” initiatives to standardize in-store operating procedures and brands position the company “to more effectively and efficiently integrate these and other acquisitions.”

OMNICHANNEL … Monro has doubled the scope of its collaboration with Amazon to provide tire installation services to Amazon customers at over 800 shops across 21 states.

“We’ve been very pleased with the smooth rollout of this program since it started in July of last year, and very encouraged by the positive customer feedback and average 4.6-star rating across the locations where this program has been rolled out,” Ponton said. “These services are now available to customers across approximately two-thirds of our store footprint, and we are on track to expand this program to all Monro retail locations across 30 states.”

Following the modernization of the company’s retail and corporate websites in fiscal 2019, management expects Monro to complete the final phase of its omnichannel build-out in the second half of fiscal 2020. Once fully rolled out, customers will be able to view and purchase tires online, as well as schedule an appointment for in-store installation.

The company also plans to implement a cloud-based, data-driven store staffing and scheduling system in an attempt to drive staffing efficiency by more accurately rebalancing the level of technical skills in each shop, so locations are staffed with techs who have the appropriate skill level for the services required. This will be supported by a mobile app allowing employees to pick up shifts and giving them flexibility to increase their hours and earnings.          — Marc Vincent