Monro Reports Highest Comp-Store Sales Increase Since Fiscal 2011

Despite mild weather during part of the quarter, Monro Inc. was able to deliver $310.11 million in net sales for the fiscal third quarter ended Dec. 29, 2018 — an increase of $24.38 million, or 8.5 percent, over the previous year. The total sales increase breaks down as …
• Roughly $19.80 million in sales from new stores, including approximately $14.30 million in sales from recent acquisitions.
• A comparable-store sales increase of 2.2 percent.
• A decrease in sales from closed stores of roughly $1.30 million.

When adjusted for one less selling day in the current-year quarter, comp-store sales increased 3.3 percent. This marks Monro’s fourth consecutive quarter of positive comp-store sales and represents its highest quarterly comp-store sales increase since the third quarter of fiscal 2011.

TIRES & BRAKES … Management attributed the company’s comp-store sales performance to a higher average ticket from improved in-store execution and strength in the tire and brake categories. Comp-store sales (adjusted for days) …
• Increased 12 percent for brakes.
• Increased 3 percent for tires.
• Increased 1 percent for alignments.
• Were flat for maintenance services.
• Decreased 4 percent for front end/shocks.

“We experienced notable strength in our tire business again this quarter, which represents half of our sales and our largest category,” President and CEO Brett Ponton told analysts on the company’s Jan. 31 quarterly report conference call. “Our optimized tire sales and pricing strategy continues to yield results and drove a 3-percent increase in tire comparable-store sales during the third quarter, making our fourth consecutive quarter of positive tire comp-sales growth.

“Our tire performance was driven by higher ticket and stable unit volume. In line with trends experienced in previous quarters, we also saw sustained momentum with our online tire pricing strategy since we unbundled the price of our tires and installation in the fourth quarter of fiscal 2018, which has continued to drive increased conversion in online service appointments.”

Ponton also pointed out that demand for brakes has been strong and that Monro came through with double-digit comp-sales growth in the category for the second consecutive quarter.

WEATHER IMPACT … “We saw accelerated topline growth in October and November, which was partially offset by a slowdown in comparable-store sales in December, resulting from mild winter weather conditions we experienced across our markets,” Ponton said on the call. “While we saw early snowfall above last year’s levels in November — which contributed to our topline strength during the month — it was partially offset by limited snowfall in our northern markets in December compared to last year, which negatively impacted comparable-store sales in that month.

“However, the softness we experienced around the holidays period was temporary, and we’re encouraged by the stronger topline trends we saw in the back half of January, which have led to comparable-store sales growth of approximately 2 percent so far in the fourth quarter.”

For the fiscal third quarter as a whole, the company’s northern markets outperformed its southern markets.

OTHER ITEMS OF INTEREST … Monro’s gross profit increased 10.3 percent to $117.97 million, and its gross margin expanded 60 basis points to 38 percent. Management pegged the improvement to benefits from initiatives to optimize the company’s product and service offerings (such as the introduction of good/better/best service packages), optimization of its store staffing model and leverage from higher comp-store sales.

During the quarter, Monro opened nine company-operated shops and closed one, ending the period with 1,186 company-operated shops, 99 franchised locations, eight wholesale locations and three retread facilities.

Management continues to expect Monro to generate fiscal 2019 sales between $1.185 billion and $1.215 billion, which would represent an increase of 5.1 percent to 7.7 percent when compared to fiscal 2018 sales. The fiscal 2019 sales guidance continues to assume a comp-store sales increase between 1 percent and 3 percent on a 52-week basis.      — Marc Vincent