Monro Reports 8% Rise In Brake Comps

For the fiscal fourth quarter ended March 30, 2019, Monro Inc. reported $287.20 million in net sales — an increase of $1.63 million, or 0.6%, over the same period a year ago. The growth came from $17.70 million in sales from new shops (including $14 million from recent acquisitions), which was partially offset by a 5.7% same-store sales decrease and an $800,000 decline in sales from closed stores.

Adjusted for less selling days in the current-year quarter, comp-store sales increased 0.5%. (Fiscal 2019 was a 52-week year with 361 selling days, compared to 368 selling days in fiscal 2018, which included an extra week of sales in the fourth quarter). Management attributed the 0.5% adjusted comp-store sales increase to higher average ticket and strength in the brake category — a trend they expect to continue in fiscal 2020 as Monro capitalizes on initiatives rolled out in fiscal 2019.

By category, comp-store sales (adjusted for days) …
• Rose approximately 8% for brakes.
• Increased 1% for alignments.
• Were unchanged for maintenance services.
• Decreased 1% for tires.
• Declined 2% for front end/shocks.

Management attributed the 1% decline in tire comps to lower unit volume, partially offset by higher ticket. “We believe this was partially driven by consumers making trade-offs and prioritizing brakes over tires,” President and CEO Brett Ponton said on the company’s May 21 earnings conference call. Lower-than-expected income tax refunds also were a factor.

Nonetheless, Ponton noted that trends in the company’s tire business improved throughout the quarter. “Our optimized tire sales and pricing strategy continues to bear fruit, and we’re encouraged to see the optimization of our tire assortment … is driving accelerated tire comparable-sales growth in the [fiscal 2020] first quarter to date,” he pointed out.

Regarding brakes, Ponton said that Monro’s optimized good/better/best brake package pricing —combined with higher brake transaction volume — contributed to gross margin expansion in the quarter.

As a whole, the company’s northern markets outperformed its southern markets, according to Ponton; however, northern markets underperformed in January because of mild weather conditions.

“We experienced temporary softness around the December holiday period and in early January,” Ponton said. “We experienced a rebound in comparable-store sales in February and March, despite more difficult year-over-year comparisons.”

Adjusted for days, January comped down 2%, while February rose 3% and March increased 1%.

The company’s gross profit increased 2.1% to $110.08 million in the quarter, while gross margin rose 60 basis points to 38.3%, attributable to initiatives designed to optimize Monro’s product and service offerings and store staffing. Net income slipped 3.8% to $16.82 million.

“As we enter the spring service selling season in the first quarter of fiscal 2020, we are encouraged to see that momentum has continued with comparable-store sales up approximately 2% quarter-to-date despite cold and wet spring weather tempering performance,” Ponton said on the call.

Management expects Monro’s fiscal 2020 sales to come in between $1.29 billion and $1.33 billion — an increase of 8% to 10% compared to fiscal 2019 sales. This assumes a comp-store sales increase between 2% and 4%.