Monro Inc. president and CEO Brett Ponton, on a Jan. 30 conference call, updated members of the financial community on a number of initiatives underway designed to turn around the company. Ponton’s comments acknowledged that Monro’s financial results are far from where management wants them to be.
“We know we can do better, and we have moved quickly to launch a number of strategic initiatives that will get us there,” he said. “More specifically, since our last earnings call, we have completed a rigorous business assessment, which has further highlighted the significant opportunity we have for improvement, particularly as it relates to our in-store execution.
“As we previously discussed, we believe that — by delivering a high-quality and consistent experience to our customers — we can improve customer retention and, over time, drive higher customer lifetime value. This will enable us to drive traffic back into our stores, which we believe will lead to sustainable growth in comparable-store sales and higher profitability.”
OPERATIONS … The company has kicked off an initiative called “Monro Forward” focused on setting brand standards for how Monro looks and how it operates. “Monro is a company that has grown through decades of acquisition activity, which has resulted in a store base that includes a wide range of store sizes and configurations. Our objective is to drive consistency in our store appearance and store layout across our markets and store formats, regardless of structural differences,” Ponton explained. “The outcome will be a store refresh that modernizes our store appearance and establishes clear standards for our retail banners.
“This fresh and modern look will carry into the store and extend to visual merchandising and customer amenities. We will also update how we communicate in-store with our customers by simplifying and updating material, such as service estimates, invoices and inspection forms.”
The company also is evaluating its tire offerings. “When we reviewed our tire assortment, we took a more granular approach to category management, and we identified several gaps in our tire offering, particularly in our mid-to higher-price points,” Ponton said on the call. “To address this in the near term, we’ve already started to make changes to our mix. However, to truly optimize our tire assortment, we will align every store’s inventory to its local demographics and vehicle population, so we can truly offer our customers the right tires at the right price.”
Monro also is refining its selling approach so its employees are better able to educate consumers on the benefits across the company’s good, better and best product options. “The combined effect would be to maximize our ticket and drive higher conversion through an improved customer experience in merchandising strategy,” Ponton said.
He also said Monro wants to set high standards of performance for its employees, starting with understanding the moments that separate a good customer experience from a bad one. “We will leverage best practices from both inside and outside Monro to help us define those moments in the in-store procedures and practices that we want our teammates to follow,” Ponton explained.
This will be supported by new training and better defining the roles and responsibilities of shop employees.
MARKETING … Monro plans to move away from its current product-focused, offer-based marketing. Its new thrust will be more customer-focused, leveraging the company’s CRM database. “We will leverage what we know about our customers’ vehicles and buying habits, and OEM maintenance tables, to tailor a timely message regarding upcoming needed service or parts replacement,” Ponton said. “By engaging with our customers in a smart and appropriate way, we can improve customer retention and drive higher marketing productivity, while putting forth a marketing message that encapsulates the true breadth of our service offering and reinforces our strong value proposition.”
He said Monro has hired a customer analytics firm to provide market segmentation and demographic information for the geographic areas surrounding each of its shops to help identify new customers and directly market to them. “We can also use this customer information to help us in choosing greenfield locations, as well as identifying favorable markets in which to pursue acquisitions,” Ponton added.
TECHNOLOGY … Ponton also outlined a variety of technology projects, including …
• Monro is working on an electronic shop staffing model to replace the current scheduling process, which is done by hand. The goal is to leverage detailed sales data to more effectively staff shops, not only with the right number of technicians, but also to match technical abilities to the mix of services provided in each shop.
• The company is developing a learning management system called “Monro University” to provide consistent and ongoing training for its shop personnel.
• Monro plans to add technology that will allow its field managers to evaluate and manage their shops’ performance across such key performance indicators as traffic, sales mix, staffing, margin and customer reviews.
• The company also plans to introduce an interactive tablet for Monro customers to streamline the sales process and enhance the customer experience.
• In pursuit of a more omni-channel experience, Monro plans to upgrade its website to be mobile-capable and to allow customers to view and purchase available tires online and to make an appointment for installation at a nearby Monro location. This revamped website also would have the capability to integrate with multiple third-party online tire sellers.
“We are engaged with a number of online tire sellers as a preferred installer. While still representing a small percentage of our business, these installations are very profitable, with a high average ticket that is comparable to our corporate average,” Ponton said. “And, just as important, half of the customers sent to us from these online sellers are new to Monro, making this a meaningful traffic driver.”
“It’s also worth noting, as part of our assessment, we discovered that Monro is one of the only tire sellers online to include installation in the pricing of its tires. Unless consumers closely read the small print, this may give the appearance that our tires are anywhere from $17 to $20 higher than many of our online competitors,” Ponton pointed out. “The reality is our pricing is in-line with those of our largest competitors in our major markets.
“To alleviate this potential misperception, we will be unbundling the price of our tires and installation. We expect this change to be completed by the end of the fourth quarter.”
CONCLUSION … “As I reflect back on my six months at Monro, I am pleased with the steps we’ve taken, and I am confident in our detailed assessment of the business, the opportunities uncovered and the plan we put in place to drive change throughout the organization,” Ponton told analysts on the call.
“We do not expect to see improvement overnight, as these initiatives will take time to implement. But, I am confident that our investment in technology and our data-driven approach — coupled with strong and disciplined execution — will deliver long-term profitability and value to our shareholders.”
In May, the company plans to lay out a three-year plan as well as a series of benchmarks to track Monro’s progress.
“We believe many of our initiatives can be executed by reprioritizing our capital investments, and this would not significantly change our company’s investment profile,” Ponton said. “Having said that, with the significant benefit we’re projecting from lower corporate tax rates in fiscal 2019, we are considering taking a portion of these tax savings and accelerating our investments in fiscal 2019 to fast-track many of our initiatives.
“We are still working through our fiscal 2019 budget, and will provide an update on our capital expenditure plans and financial targets on our next earnings call.” — Marc Vincent