Monro Streamlining Store Refresh Program To Decrease Disruption

On the company’s Oct. 24 earnings conference call, Monro Inc. President and CEO Brett Ponton told analysts that the company has made significant progress on management’s store refresh program, which focuses on refreshing the company’s shops to create a more consistent appearance while also implementing standardized in-store operating procedures, which management calls the “Monro Playbook.”

At the same time, the company is rebranding certain shops to a tire-oriented banner. This is happening where demographics favor the format. “We believe this will optimize our brand awareness and increase our tire sales without sacrificing our service revenue,” Ponton explained.

It’s worth noting that Monro’s tire stores generate about twice the annualized sales of its service shops.

ROLLOUT … As you may recall, Monro completed a pilot refresh program at 44 shops in the Rochester, NY, area and in certain Mid-Atlantic markets last year. The company then began scaling this initiative to 43 shops in its southern markets during the first quarter of fiscal 2020.

During the second quarter ended Sept. 28, 2019, the company began — and substantially completed — the transformation of an additional 74 shops in four markets, while beginning work on 42 of its recently acquired California locations. This brought the total number of shops in various stages of change during the quarter to 259 locations.

It’s worth noting that Monro’s store refresh process takes roughly 17 weeks to implement.

“While we expected this to cause some impact, the process of implementing our ‘Operational Excellence’ initiatives while also dealing with the construction and necessary updates to the appearance of these stores caused more disruption to the day-to-day execution than we had anticipated, resulting in a 70-basis-point headwind to our comp sales in the quarter,” Ponton said on the call.

“The good news is we’ve finalized the transformation of the 43 stores we began in the first quarter and substantially completed the additional 74 stores during the second quarter,” he said. “Importantly, we have learned from our mistakes … . In particular, we’ve streamlined our processes to a more targeted approach that will better prepare and support our teammates during the store transformation, which we believe will ensure that the rollout is smoother moving forward.”

He noted that the first group of refreshed shops, as well as the second group (the 43 stores that were completed during the fiscal second quarter), are reporting double-digit comp-store sales growth year-over-year. “These results are in-line with the forecast of our analytics model, which gives us confidence in the long-term contribution of our recently completed stores, as well as the expected benefit of our larger refresh program moving forward,” Ponton said.

GOING FORWARD … During the second half of the current fiscal year, Monro expects to finalize the refresh of the 74 stores that were already substantially completed during the second quarter, as well as the 42 recently acquired locations in California, where Monro began implementing the company’s standardized operating procedures late in the second quarter.

As you may recall, the California shops will be re-branded to Monro’s Tire Choice Auto Service Centers banner in an attempt to drive higher awareness for tires while maintaining their service focus.

Over the next year and a half, management plans to take a measured approach to the rollout of its refresh initiative, according to Ponton’s comments. “While we will work to minimize the disruption as much as possible, we’re still moving full steam ahead, albeit setting a limit of 60 to 80 stores per quarter,” he told analysts on the call.

“The group of stores that we have prioritized over the next few quarters includes our newly acquired stores and targeted markets where our analytics model has indicated the strongest potential for increased visibility and traction for our tires banners in order to achieve what we expect will be the highest possible returns,” Ponton added.

OTHER INITIATIVES … Monro is in the process of implementing a new store network infrastructure upgrade, which has been rolled out to approximately 10% of its store base. “This new, updated network will be critical as we roll out our digital phone system toward the end of the year,” Ponton said, adding that the phone system will be rolled out to the company’s recently refreshed shops before expanding to its entire store base over the second half of the fiscal year.

The company also is working to introduce a tire category management and dynamic pricing system designed to better optimize its assortment and drive margin improvement. Monro also is piloting a cloud-based vehicle inspection tool. “We expect the rollout of these initiatives to be completed by the end of fiscal 2021,” Ponton stated.

Regarding the company’s partnership with Amazon, Ponton said management is pleased with the roll out of this collaboration at more than 800 shops across 21 states. “We’re continuing to see strong customer satisfaction metrics at these locations and look forward to expanding this collaboration across our portfolio,” he said.

Ponton said management has opted to push back the second phase of its omnichannel strategy to focus on executing its category management and store-staffing initiatives. “We now expect to implement the second phase of our omnichannel strategy — including offering our customers the option to view and purchase tires online and schedule an appointment for in-store installation — during fiscal 2021,” he said.

Additionally, the company has added curriculum to Monro University, its cloud-based training program, and is in the process of rolling it out across the company’s store base.