ROCHESTER, N.Y. (Oct. 24, 2013) — Monro Muffler Brake Inc. reported double-digit gains in operating and net profit and sales for the quarter ended Sept. 28, but management is maintaining a cautious outlook for the rest of the fiscal year based on what it terms "volatile" near-term economic trends.
Based on "current visibility, business and economic trends," Monro said it expects comparable business at its existing stores to be flat to down 1 percent for the remainder of the year. As a result, management is scaling back its earnings expectations for fiscal 2014 somewhat, to a range of $1.58 to $1.65 per share from a range of $1.58 to $1.70 a share.
The estimate is still a 20- to 32-percent improvement over fiscal 2013.
Operating and net income for the quarter jumped 21.2 and 18.2 percent, respectively, to $23.9 million and $13.6 million, prompting President and CEO John Van Heel to comment: "Our results in the second quarter indicate that customers remain conservative in their spending…. While we were disappointed that our tire sales remained weak during the second quarter, we were encouraged by a recovery in our service business, with comparable store sales in exhaust and brakes both up more than 4 percent year-over-year."
Sales for quarter increased 16.3 percent to $205.3 million, with revenue from newly acquired stores accounting for all of the increase and more, as comparable store sales dropped 2.1 percent on lower sales of tires (down 6 percent), alignment (down 4 percent) and maintenance (down 2 percent). On the plus side, sales of exhausts and brakes were were up 5 and 4 percent, respectively.
"While we were disappointed that our tire sales remained weak during the second quarter," Mr. Van Heel said, "we were encouraged by a recovery in our service business…"
For the six-month period, net income jumped 17.4 percent to $27.2 million on 19-percent higher sales of $411.5 million.
The company added 12 locations and closed six locations during the quarter, ending the quarter with 940 stores. Monro also has closed its acquisition of 10 Curry's Auto Service stores located in the Washington D.C. metropolitan area. Annual sales for these stores are approximately $18 million, in an 80/20 auto service/tires breakdown.
Monro also disclosed it has signed agreements to acquire 10 stores in Delaware, Maryland and Kentucky, with combined annual sales of about $15 million in a 55/45 tires/service breakdown. Monro did not identify the owners of these stores, which will be rebranded Mr. Tire and Towery's Tire brands in the respective markets.
For the third quarter, Monro said it expects comparable store sales to fall 1 to 3 percent.
"Our near- and long-term outlook remain the same as we noted earlier in the year," Mr. Van Heel said. "Our long-term view of the industry and our business remains positive, although trends-to-date in the third quarter have been challenging, with month-to-date comparable store sales through October 22nd down 2.8 percent, due primarily to weak tire sales."
Mr. Van Heel said Monro's outlook for the remainder of the year reflects the firm's year-to-date sales run rate, benefits from improving margins and cost control and the contributions from recent acquisitions.
"However, we continue to believe that sales, particularly of tires, should benefit in the second half of the year with more normalized weather patterns throughout our markets following two consecutive years of warm winters and associated customer deferrals, although we have not incorporated this potential upside into our outlook."
On a combined basis, the acquisitions Monro has completed and announced to date in fiscal 2014 represent nearly 5-percent annualized sales growth, Mr. Van Heel said, "and we are encouraged by the opportunities for additional attractive acquisitions by our fiscal year-end."