- Second Quarter Sales Decreased to $322.1 Million
- Second Quarter Comparable Store Sales Decreased 2.3%
- Second Quarter Diluted EPS of $.40; Adjusted Diluted EPS1 of
$.41
- Generated Cash from Operating Activities of $98 Million for the
First Half of Fiscal 2024
- Distributed Second Quarter Fiscal 2024 Cash Dividend of $.28
per Share
Monro, Inc. (Nasdaq: MNRO), a leading provider of automotive
undercar repair and tire services, today announced financial
results for its second quarter ended September 23, 2023.
Second Quarter Results
Sales for the second quarter of the fiscal year ending March 30,
2024 (“fiscal 2024”) decreased 2.3% to $322.1 million, as compared
to $329.8 million for the second quarter of the fiscal year ended
March 25, 2023 (“fiscal 2023”). Comparable store sales decreased
2.3% for the period due to consumers deferring tire purchases as
persistent inflationary pressures impacted purchases of
higher-ticket items across the retail spectrum. This compares to an
increase in comparable store sales of 1.3% in the prior year
period. Sales from new stores increased $1.2 million, primarily
from recent acquisitions.
Comparable store sales decreased approximately 3% for brakes, 4%
for tires and alignments and 5% for front end/shocks compared to
the prior year period. Comparable store sales increased
approximately 12% for batteries and were flat for maintenance
services compared to the prior year period. Please refer to the
“Comparable Store Sales” section below for a discussion of how the
Company defines comparable store sales.
Gross margin increased 30 basis points compared to the prior
year period, primarily resulting from lower material costs as a
percentage of sales, which were partially offset by higher
distribution and occupancy costs as a percentage of sales as well
as higher technician labor costs as a percentage of sales due to
wage inflation.
Total operating expenses for the second quarter of fiscal 2024
were $92.6 million, or 28.8% of sales, as compared to $93.3
million, or 28.3% of sales in the prior year period. The increase
as a percentage of sales was principally due to lower
year-over-year comparable store sales.
Operating income for the second quarter of fiscal 2024 was $22.4
million, or 6.9% of sales, as compared to $23.5 million, or 7.1% of
sales in the prior year period.
Interest expense was $4.8 million for the second quarter of
fiscal 2024, as compared to $5.7 million for the second quarter of
fiscal 2023, principally due to a decrease in weighted average
debt.
Income tax expense in the second quarter of fiscal 2024 was $4.7
million, or an effective tax rate of 26.8%, compared to $4.7
million, or an effective tax rate of 26.6% in the prior year
period.
Net income for the second quarter of fiscal 2024 was $12.9
million, as compared to $13.1 million in the same period of the
prior year. Diluted earnings per share for the second quarter of
fiscal 2024 was $.40, compared to $.40 in the second quarter of
fiscal 2023. Adjusted diluted earnings per share, a non-GAAP
measure, for the second quarter of fiscal 2024 was $.41. This
compares to adjusted diluted earnings per share of $.43 in the
second quarter of fiscal 2023. Please refer to the reconciliation
of adjusted diluted earnings per share in the table below for
details regarding excluded items in the second quarters of fiscal
2024 and 2023. Please refer to the “Non-GAAP Financial Measures”
section below for a discussion of this non-GAAP measure.
During the second quarter of fiscal 2024, the Company closed one
store. Monro ended the quarter with 1,298 company-operated stores
and 77 franchised locations.
“Our second quarter comparable store sales decline of
approximately 2% reflects topline results that were challenged.
This was due to consumers deferring tire purchases as persistent
inflationary pressures impacted purchases of higher-ticket items
across the retail spectrum. This was clearly evidenced by an
industry-wide slowdown in tire unit sales in the regions of the
country where a vast majority of our store footprint is
concentrated. This led to pressured store traffic, which was not
supportive to sales of our higher-margin service categories in the
quarter. While our tire units were down approximately 10%,
leveraging the strength of our manufacturer-funded promotions
allowed us to optimize our assortment for improved tire
profitability in the quarter. And, while continued consumer trade
down dynamics led to a higher proportion of lower-margin opening
price point tires within overall industry unit sales, we remained
focused on maintaining a healthy mix of opening price point tires
in the quarter. Encouragingly, based on retail sell-out data from
Torqata, a subsidiary of American Tire Distributors, we maintained
our tire market share in our higher-margin tiers. We mitigated this
industry-wide slowdown with actions to reduce non-productive labor
costs, including overtime hours in our stores. Despite a tough
macro-economic environment, the resiliency of our business model
allowed us to expand gross margin and maintain our year-over-year
profitability even on lower tire sales volumes. While our
preliminary comp store sales for fiscal October are down
approximately 5%, our stores are properly staffed and ready for the
back-half of the year. We will remain relentlessly focused on
achieving comp sales growth through accelerating growth in our 300
small or underperforming stores, maintaining a balanced approach
between our tire and service categories with competitive pricing to
drive store traffic and continuously improving our customer
experience. We will also strive to expand our gross margins through
properly training our Teammates to maximize their productivity.
Given the current pressures on the consumer, we are also laser
focused on maximizing profitability through prudent cost control,
which includes right sizing our fixed costs and rationalizing
unproductive labor. While we take these actions, we will not cut
productive labor at the sacrifice of our standards and to the
detriment of our long-term service model. In addition, we will
create cash by optimizing inventory and leveraging the strength of
our vendor partners for better availability, quality and cost of
parts and tires in our stores”, said Mike Broderick, President and
Chief Executive Officer.
Broderick continued, “While we will need to see an improvement
in the overall health of the consumer before we can fully
capitalize on longer-term industry tailwinds, we have successfully
re-positioned our cost structure to deliver improved profitability
even on lower comp store sales.”
First Six Months
Results2
For the current six-month period:
- Sales decreased 4.5% to $649.1 million from $679.4 million in
the same period of the prior year. Comparable store sales decreased
0.9%, compared to increases of 0.8% for total company and 2.0% for
Retail locations in the prior year period.
- Gross margin for the six-month period was 35.3%, compared to
35.2% in the prior year period.
- Operating income was 6.1% of sales, compared to 7.3% in the
prior year period.
- Net income for the first six months of fiscal 2024 was $21.7
million, or $.68 per diluted share, as compared to $25.6 million,
or $.77 per diluted share in the prior year period.
- Adjusted diluted earnings per share, a non-GAAP measure, in the
first six months of fiscal 2024 was $.72. This compares to adjusted
diluted earnings per share of $.85 in the first six months of
fiscal 2023. Please refer to the reconciliation of adjusted diluted
earnings per share in the table below for details regarding
excluded costs in the first six months of fiscal 2024 and 2023.
Please refer to the “Non-GAAP Financial Measures” section below for
a discussion of this non-GAAP measure.
Strong Financial
Position
During the first half of fiscal 2024, the Company generated
operating cash flow of approximately $98 million. As of September
23, 2023, the Company had cash and cash equivalents of
approximately $9 million and availability on its revolving credit
facility of approximately $515 million.
Second Quarter Fiscal 2024 Cash
Dividend
On September 5, 2023, the Company paid a cash dividend for the
second quarter of fiscal 2024 of $.28 per share.
Share Repurchases
The Company maintains a share repurchase program authorizing the
Company to repurchase up to $150 million of its common stock, with
approximately $53 million remaining for future repurchases. The
Company may repurchase shares of common stock from time to time as
market conditions warrant, subject to regulatory
considerations.
The method, timing and actual number of shares repurchased will
depend on a variety of factors, including price, general business
and market conditions, alternative investment opportunities, and
legal requirements.
The Company’s repurchase program has no expiration date, does
not require the purchase of any minimum number of shares and may be
suspended, modified or discontinued at any time without prior
notice.
Company Outlook
Monro is not providing fiscal 2024 financial guidance at this
time but will provide perspective on its outlook for fiscal 2024
during its earnings conference call.
Earnings Conference Call and
Webcast
The Company will host a conference call and audio webcast on
Wednesday, October 25, 2023 at 8:30 a.m. Eastern Time. The
conference call may be accessed by dialing 1-833-470-1428 and using
the required access code of 270827. A replay will be available
approximately two hours after the recording through Wednesday,
November 8, 2023 and can be accessed by dialing 1-866-813-9403 and
using the required access code of 423916. A replay can also be
accessed via audio webcast at the Investors section of the
Company’s website, located at corporate.monro.com/investors.
About Monro, Inc.
Monro, Inc. (NASDAQ: MNRO) is one of the nation’s leading
automotive service and tire providers, delivering best-in-class
auto care to communities across the country, from oil changes,
tires and parts installation, to the most complex vehicle repairs.
With a growing market share and a focus on sustainable growth, the
Company generated approximately $1.3 billion in sales in fiscal
2023 and continues to expand its national presence through
strategic acquisitions and the opening of newly constructed stores.
Across approximately 1,300 stores and 9,000 service bays
nationwide, Monro brings customers the professionalism and
high-quality service they expect from a national retailer, with the
convenience and trust of a neighborhood garage. Monro’s highly
trained teammates and certified technicians bring together hands-on
experience and state-of-the-art technology to diagnose and address
automotive needs every day to get customers back on the road
safely. For more information, please visit corporate.monro.com.
Cautionary Note Regarding
Forward-Looking Statements
The statements contained in this press release that are not
historical facts may contain statements of future expectations and
other forward-looking statements made pursuant to the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements can be identified by such words and
phrases as “expect,” “estimate,” “focus,” “outlook,” “strive,”
“anticipate,” “believe,” “could,” “may,” “will,” “intend,” and
other similar words or phrases. Forward-looking statements are
subject to risks, uncertainties and other important factors that
could cause actual results to differ materially from those
expressed. These factors include, but are not necessarily limited
to product demand, dependence on and competition within the primary
markets in which the Company’s stores are located, the need for and
costs associated with store renovations and other capital
expenditures, realizing the anticipated benefits of the divestiture
of the Company’s wholesale tire and distribution assets, the effect
of general business or economic and geopolitical conditions on the
Company’s business, including consumer spending levels, inflation,
and unemployment, seasonality, changes in the U.S. trade
environment, including the impact of tariffs on products imported
from China, the impact of competitive services and pricing, product
development, parts supply restraints or difficulties, the impact of
weather trends and natural disasters, industry regulation, risks
relating to leverage and debt service (including sensitivity to
fluctuations in interest rates), continued availability of capital
resources and financing, risks relating to protection of customer
and employee personal data, risks relating to litigation, risks
relating to integration of acquired businesses and other factors
set forth elsewhere herein and in the Company’s Securities and
Exchange Commission filings, including the Company’s annual report
on Form 10-K for the fiscal year ended March 25, 2023. Except as
required by law, the Company does not undertake and specifically
disclaims any obligation to update any forward-looking statement to
reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
Non-GAAP Financial
Measures
In addition to reporting diluted earnings per share (“EPS”),
which is a generally accepted accounting principles (“GAAP”)
measure, this press release includes adjusted diluted EPS, which is
a non-GAAP financial measure. The Company has included a
reconciliation from adjusted diluted EPS to its most directly
comparable GAAP measure, diluted EPS. Management views this
non-GAAP financial measure as a way to better assess comparability
between periods because management believes the non-GAAP financial
measure shows the Company’s core business operations while
excluding certain non-recurring items such as costs related to
shareholder matters from the Company’s equity capital structure
recapitalization, transition costs related to the Company’s
back-office optimization, corporate headquarters relocation costs,
and items related to store closings, as well as acquisition
initiatives.
This non-GAAP financial measure is not intended to represent,
and should not be considered more meaningful than, or as an
alternative to, its most directly comparable GAAP measure. This
non-GAAP financial measure may be different from similarly titled
non-GAAP financial measures used by other companies.
Comparable Store Sales
The Company defines comparable store sales as sales for
locations that have been opened or owned at least one full fiscal
year. The Company believes this period is generally required for
new store sales levels to begin to normalize. Management uses
comparable store sales to assess the operating performance of the
Company’s stores and believes the metric is useful to investors
because the Company’s overall results are dependent upon the
results of its stores.
Source: Monro, Inc. MNRO-Fin
MONRO, INC.
Financial Highlights
(Unaudited)
(Dollars and share counts in
thousands)
Quarter
Ended Fiscal
September
2023
2022
%
Change
Sales
$
322,091
$
329,818
(2.3
)%
Cost of sales, including distribution and
occupancy costs
207,118
213,083
(2.8
)%
Gross profit
114,973
116,735
(1.5
)%
Operating, selling, general and
administrative expenses
92,618
93,262
(0.7
)%
Operating income
22,355
23,473
(4.8
)%
Interest expense, net
4,801
5,705
(15.8
)%
Other income, net
(34
)
(98
)
(65.3
)%
Income before income taxes
17,588
17,866
(1.6
)%
Provision for income taxes
4,716
4,745
(0.6
)%
Net income
$
12,872
$
13,121
(1.9
)%
Diluted earnings per share
$
0.40
$
0.40
(0.0
)%
Weighted average number of diluted shares
outstanding
32,272
32,729
Number of stores open (at end of
quarter)
1,298
1,297
MONRO, INC.
Financial Highlights
(Unaudited)
(Dollars and share counts in
thousands)
Six
Months Ended Fiscal
September
2023
2022
%
Change
Sales
$
649,059
$
679,353
(4.5
)%
Cost of sales, including distribution and
occupancy costs
419,691
440,429
(4.7
)%
Gross profit
229,368
238,924
(4.0
)%
Operating, selling, general and
administrative expenses
189,664
189,197
0.2
%
Operating income
39,704
49,727
(20.2
)%
Interest expense, net
10,009
11,364
(11.9
)%
Other income, net
(92
)
(178
)
(48.3
)%
Income before income taxes
29,787
38,541
(22.7
)%
Provision for income taxes
8,086
12,936
(37.5
)%
Net income
$
21,701
$
25,605
(15.2
)%
Diluted earnings per share
$
0.68
$
0.77
(11.7
)%
Weighted average number of diluted shares
outstanding
32,112
33,349
MONRO, INC.
Financial Highlights
(Unaudited)
(Dollars in thousands)
September 23,
2023
March
25,
2023
Assets
Cash and equivalents
$
9,053
$
4,884
Inventories
146,679
147,397
Other current assets
92,122
106,186
Total current assets
247,854
258,467
Property and equipment, net
289,568
304,989
Finance lease and financing obligation
assets, net
197,296
217,174
Operating lease assets, net
204,158
211,101
Other non-current assets
787,893
785,146
Total assets
$
1,726,769
$
1,776,877
Liabilities and Shareholders’
Equity
Current liabilities
$
472,367
$
449,177
Long-term debt
55,000
105,000
Long-term finance leases and financing
obligations
269,666
295,281
Long-term operating lease liabilities
184,163
191,107
Other long-term liabilities
45,430
41,390
Total liabilities
1,026,626
1,081,955
Total shareholders’ equity
700,143
694,922
Total assets
$
1,726,769
$
1,776,877
MONRO, INC.
Reconciliation of Adjusted
Diluted Earnings Per Share (EPS)
(Unaudited)
Quarter Ended Fiscal
September
2023
2022
Diluted EPS
$
0.40
$
0.40
Net gain on sale of wholesale tire and
distribution assets (a)
−
(0.02
)
Store closing costs
−
0.01
Management restructuring/transition
costs
−
0.03
Costs related to shareholder matters
0.01
0.01
Adjusted Diluted EPS
$
0.41
$
0.43
Supplemental Reconciliation of
Adjusted Net Income
(Unaudited)
(Dollars in Thousands)
Quarter Ended Fiscal
September
2023
2022
Net Income
$
12,872
$
13,121
Net gain on sale of wholesale tire and
distribution assets (a)
−
(788
)
Store closing costs
(43
)
230
Monro.Forward initiative costs
−
19
Acquisition due diligence and integration
costs
−
1
Management restructuring/transition
costs
−
1,338
Costs related to shareholder matters
439
317
Transition costs related to back-office
optimization
97
−
Corporate headquarters relocation
costs
60
−
Provision for income taxes on pre-tax
adjustments (b)
(143
)
(280
)
Adjusted Net Income
$
13,282
$
13,958
MONRO, INC.
Reconciliation of Adjusted
Diluted Earnings Per Share (EPS)
(Unaudited)
Six Months Ended
Fiscal
September
2023
2022
Diluted EPS
$
0.68
$
0.77
Net gain on sale of wholesale tire and
distribution assets (a)
−
(0.05
)
Store closing costs
−
0.01
Management restructuring/transition
costs
−
0.03
Costs related to shareholder matters
0.03
0.01
Transition costs related to back-office
optimization
0.01
−
Certain discrete tax items (c)
−
0.08
Adjusted Diluted EPS
$
0.72
$
0.85
Supplemental Reconciliation of
Adjusted Net Income
(Unaudited)
(Dollars in Thousands)
Six Months Ended
Fiscal
September
2023
2022
Net Income
$
21,701
$
25,605
Net gain on sale of wholesale tire and
distribution assets (a)
−
(1,968
)
Store closing costs
4
226
Monro.Forward initiative costs
−
42
Acquisition due diligence and integration
costs
5
(9
)
Management restructuring/transition
costs
−
1,338
Costs related to shareholder matters
1,275
317
Transition costs related to back-office
optimization
641
-
Corporate headquarters relocation
costs
60
-
Provision for income taxes on pre-tax
adjustments (b)
(502
)
13
Certain discrete tax items (c)
−
2,644
Adjusted Net Income
$
23,184
$
28,208
a)
Amount includes gain on sale of a
related warehouse, net of associated closing costs.
b)
The Company determined the
Provision for income taxes on pre-tax adjustments by calculating
the Company’s estimated annual effective tax rate on pre-tax income
before giving effect to any discrete tax items and applying it to
the pre-tax adjustments.
c)
Amount relates to the sale of
wholesale tire locations and distribution assets, as well as the
revaluation of deferred tax balances due to changes in the mix of
pre-tax income in various U.S. state jurisdictions as a result of
the sale.
_________________________
1 Adjusted diluted EPS is a non-GAAP
measure. Please refer to the “Non-GAAP Financial Measures” section
below for a discussion of this non-GAAP measure.
2 Financial performance includes the
results of the divested Wholesale and tire distribution assets for
fiscal 2023 through June 16.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231025422326/en/
Investors and Media: Felix Veksler Senior Director, Investor
Relations ir@monro.com
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