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Monro Reports Strongest Comps In More Than 30 Quarters

For the fiscal second quarter ended Sept. 29, 2018, Rochester, NY-based Monro Inc. came through with $307.11 million in sales — an increase of $29.09 million, or 10.5 percent over the previous year. According to management, the total sales increase came from a 3.2-percent rise in comparable-store sales, as well as $19.90 million in sales from new stores (including $15.60 million in sales from recent acquisitions).

The 3.2-percent comp-store sales gain marked the highest quarterly comp increase since the third quarter of fiscal 2011. It’s also worth noting that Monro has now reported three consecutive quarters of positive comps for the first time since fiscal 2011.

Overall, the company’s fiscal second quarter comp-store sales growth came from higher average ticket, which management attributed to improved in-store execution, as well as strength from the brakes and tires categories.

Comp-store sales increased 12 percent for brakes — an acceleration from the 7-percent comp-store sales growth the company reported last quarter. It’s worth pointing out that Monro launched its good/better/best brake packages in the previous quarter and raised its package prices. And, despite higher prices, the company’s brake transaction volume grew 6 percent in the fiscal second quarter.

Tire comps were up 3 percent, driven by higher ticket and stable unit volume. President and CEO Brett Ponton told analysts on the company’s Oct. 25 conference call that Monro’s optimized tire sales and pricing strategy were a key factor. Notably, it was the third consecutive quarter of positive tire comps.

Maintenance services and front end/shocks comps were flat. Alignments were down 1 percent.

Monro’s gross profit rose 11.1 percent to $119.95 million, while gross margins increased 30 basis points to 39.1 percent. On a comp-store basis, gross margins were up roughly 120 basis points. Net income rose 26 percent to $21.76 million.

Ponton said that Monro’s sales momentum continued into October, where comps were up roughly 7 percent through Oct. 25, which he ascribed to strength in the tire business. He added that the company’s positive topline trends are expected to continue throughout the remainder of fiscal 2019 and beyond.

Analysts with Jefferies LLC wrote in an Oct. 25 Company Note that strong tire category comps thus far in October appear to be driven by a combination of unit volume and higher-priced product mix as opposed to price mix, which drove the category’s 3-percent comp in the fiscal second quarter as unit volume contracted.

Based on current sales, business and economic trends — as well as recently announced and completed acquisitions — management now anticipates Monro’s fiscal 2019 sales to come in between $1.19 billion and $1.22 billion. That works out as an increase of 5.1 percent to 7.7 percent compared to fiscal 2018. It also is an increase from Monro’s previous guidance calling for $1.18 billion to $1.21 billion in sales.

Management’s fiscal 2019 sales guidance continues to assume a comp-store sales increase between 1 percent and 3 percent.        — Marc Vincent

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