Monro Muffler Brake Inc. has struck a deal with Tuffy Associates Corp. to buy 17 corporate-owned Tuffy Muffler and Car-X stores in Wisconsin and South Carolina.
Terms of the deal were not disclosed. Monro said the stores—13 Car-X locations in the Milwaukee metropolitan area and four Tuffy sites in South Carolina—generate about $9 million in annual sales.
Monro will rebadge the Milwaukee stores as Monro Muffler locations and the South Carolina stores will use the firm's TreadQuarters identity.
Monro said the Milwaukee stores will expand its footprint into a new "contiguous" market, while the South Carolina locations fill an existing market. The closing is expected to occur in August.
Tuffy Associates said it has been unable to operate the stores profitably and unable to find suitable, qualified prospective candidates to purchase and operate the stores as franchised Tuffy locations.
The sale will eliminate financial losses from these stores and provide a significant infusion of financial resources that will allow the company to pay off its bank debt and increase operating capital, Tuffy said.
"We feel strongly that this business decision will result in a more focused allocation of the company's human and financial resources towards our existing franchised and company-owned stores," Tuffy said.
Tuffy Associates continues to operate an undisclosed number of company-owned stores and has more than 350 franchised locations.
Taking the Tuffy acquisition into account, Monro now projects fiscal 2013 sales to be in the range of $715 million to $735 million, although it expects comparable store sales performance to be unchanged to a drop of 2 percent vs. fiscal 2012.
Diluted earnings per share are projected to drop 15 to 20 cents to a range of $1.50 to $1.65, Monro said, based on "current visibility, business and economic trends and recent and pending acquisitions."
"Our long-term outlook for our industry and company remain extremely positive, though we expect that near-term trends will be choppy," Monro Chairman and CEO Robert Gross said.
"While gas prices have come down recently and the weather has been more favorable, the economic environment seems to be taking a greater toll on consumer sentiment and purchasing behavior.
"Trends to-date in the second quarter remain challenging. However, we have historically leveraged our strong business model to continue to expand our operations and enhance shareholder returns regardless of the economic or operating environment. We continue to anticipate that trends will improve in the second half of fiscal 2013 as customers turn to us for purchases that can no longer be delayed and weather patterns normalize," he added.
"We are optimistic about our ability to grow market share in fiscal 2013, which should allow us to achieve greater economies of scale while positioning the company even more strongly for the long term."