ROCHESTER, N.Y. (May 23, 2006) — Monro Muffler Brake Inc. expects earnings in fiscal 2007 to surpass the $1.51 per share level reported today for fiscal 2006 despite a sluggish start to the year and costs associated with the acquisition of ProCare Automotive Service Solutions.
“We expect our full year results will be very solid and represent another strong year,” said Robert Gross, president and CEO, in a conference call with financial analysts. “However, we will not generate our typical level of year-over-year growth in the first quarter due to the integration costs and operations of ProCare and the current soft environment.”
Monro Muffler has experienced a “slight decrease” in store traffic during the current quarter—which ends June 30—with consumers defering automotive maintenance and repair purchases in light of high gasoline prices and rising interest rates, Mr. Gross said.
“That said,” he continued, “we believe that many of these purchases cannot be deferred indefinitely, and we expect to see our consumers return to more normalized spending levels later in the year. Importantly, the steps we are taking now to integrate ProCare will position us for long-term growth.”
Monro expects ProCare to contribute $33 million to $35 million in sales this year while contributing anywhere from nothing to perhaps as much as 5 cents per share to the bottom line.
As such, Monro said it anticipates improved results in fiscal 2008, when ProCare should be contributing more positively to earnings and the company will have concluded its acquisition of Strauss Discount Auto. The company also has budgeted $6 million to add up to 15 new stores as part of organic growth.
For the fiscal year ended March 31, Monro reported 15.6-percent better operating income of $39.8 million on 9.3-percent higher sales of $368.7 million. Net income was up 15.2 percent to $22.7 million.
Most of the sales increase came from revenue from new stores; comparable store revenue was up 1.7 percent, Monro said, with maintenance service and tires posting gains of 8 and 7 percent, respectively. As such, tires represent 23 percent of sales, Monro said.
Fiscal 2007 sales should grow about 11 to 12 percent to as much as $420 million based on the first-time inclusion of the ProCare revenue and a comparable store sales increase of 1 to 3 percent, Monro said.
The cost of sales rose 10.1 percent during the year, due to increases in the cost of oil and tires, cutting into the gross profit margin.