For the fiscal third quarter ended Dec. 28, 2024, Monro Inc. reported $305.77 million in sales — a decrease of 3.7% up against a year ago, which management attributed to lower overall comparable-store sales resulting from lower store traffic.
By category …
• Tire sales decreased 2.4% to $151.43 million.
• Maintenance service sales decreased 4.9% to $80.07 million.
• Brakes sales decreased 5.5% to $37.63 million.
• Steering sales increased 4.7% to $25.64 million.
• Batteries sales increased 18.5% to $6.99 million.
• Exhaust sales decreased 26.9% to $3.68 million.
For sake of year-over-year comparisons, it’s worth noting that there were only 89 selling days in the three months ended Dec. 28, 2024 but 90 selling days for the three months ended Dec. 23, 2023.
Monro’s comparable-store sales decreased 1.9% for the quarter (or down only 0.8% adjusting for days) compared to a 6.1% decrease in the prior-year period. A closer look shows that comp-store sales for the fiscal third quarter ended Dec. 28, 2024 …
• Increased roughly 30% for batteries.
• Increased roughly 13% for alignments.
• Increased roughly 6% for front end/shocks.
• Decreased roughly 1% for tires.
• Decreased roughly 2% for maintenance services.
• Decreased roughly 6% for brakes.
According to management, broad-based economic pressures impacting Monro’s consumers led to lower demand in tires and the company’s higher-margin service categories. The company expects the economic environment to continue to impact its customers throughout the remainder of its 2025 fiscal year, which will end March 29, 2025.
On a regional basis, the South exceeded the company’s consolidated comp-store sales, whereas the Midwest, Northeast and West performed slightly below that consolidated comp-store figure.
Monro’s gross profit declined 7.0% to $104.80 million, and its gross margin decreased 120 basis points to 34.3%, impacted by value-oriented consumers trading down more of their tire purchases to the company’s Tier-3 offerings as well as an increased level of self-funded promotions designed to attract these value-oriented consumers to its shops. This was partially offset by lower technician labor costs as a percentage of sales.
“We remain committed to sales and unit growth and improving customer counts, and we are willing to make the necessary price and promotional investments, even if it puts pressure on our profitability in the near term,” President and CEO Mike Broderick told analysts on Monro’s Jan. 29 earnings call.
Net income fell 62.3% to $4.58 million in the fiscal third quarter, and adjusted net income declined 53.8% to $5.79 million.
During the quarter, the company closed nine shops. Monro ended the period with 1,263 company-operated shops and 48 Car-X franchised locations.
LOOKING AHEAD … During the call, Broderick disclosed that preliminary fiscal January comp-store sales were down 1%, adjusted for one additional selling day in the month. “This is driven by weakness in tire category sales that were impacted by extreme weather, which resulted in temporary store closures and lower store traffic, partially offset by strength in our service categories, including brakes,” he said. “We believe the extreme weather in January will benefit us in the coming months.
“We expect to leverage our initiatives to achieve our fourth quarter objectives, which include improving store traffic trends driven by our value-oriented oil change offerings as well as continued growth in tire units, accelerating the performance of our key service categories utilizing the benefits from [the ConfiDrive digital courtesy inspection process], and optimizing labor and efficiencies through continued improvements in productivity and maintaining prudent cost control.”
Broderick added: “Our initiatives are driving an improvement in our topline results. Our comp-store sales trends improved sequentially from the second quarter, and we exited the quarter with year-over-year comp-store sales growth in the month of December.”
Analysts with Jefferies LLC wrote in a Jan. 29 report on Monro that trade-down trends have continued to pressure tires as consumers seek lower opening price points, leading to an increase in self-funded promotions, with manufacturer-funded promotions continuing in an effort to steer customers to branded Tier-1 to Tier-3 tires instead of cheaper, less profitable Tier-4 import options.
“While we believe margin/mix pressure will likely persist due to lingering trade-down effects and promotional support, we see potential for further gains in the service segment as tire manufacturer/self-funded promotions may drive traffic that can be converted to mechanical repair via ConfiDrive service recommendations,” Bret Jordan, Patrick Buckley and CJ Dipollino wrote in their report. “Additionally, despite a soft start in January (-1.2% comp), we note the potential for improvement given easier comps in the near term (February -4.9%, March -10.3% in 2024) extending into fiscal year 2025 (Q1 -9.9%), along with the onset of winter weather that is likely to drive service work.”
The Jefferies team also noted the potential “for some margin relief as winter weather and customer service initiatives could help skew mix towards higher-margin service work” but stated that increasing tire volumes and a change in consumer preference toward Tier-1 and Tier-2 tire options is necessary for a material rebound in profitability. — Reporting by Marc Vincent, Editor
