ROCHESTER, N.Y.—Monro Muffler Brake Inc. reported double-digit gains in operating and net income for the quarter ended Sept. 27 on 7.8-percent higher sales, but management is scaling back the firm's full-year earnings forecast based on “current visibility, business and economic trends.”
In the quarter, Monro's operating income jumped 21 percent to $28.9 million, while net income rose 19.6 percent to a record $16.3 million. Sales rose to $221.3 million, with the gain coming entirely from revenue from newly acquired stores. Comparable store sales revenue fell 2 percent, Monro said, with lower demand for exhaust, tires and maintenance services offsetting gains in demand for brakes and alignments.
Monro attributed the earnings improvement to “significant contributions from our recent acquisitions, higher gross margins, and disciplined cost control.”
As for fiscal 2015, Monro revised its diluted earnings forecast to a range of $1.85 to $1.95 per share, down from the previous forecast of $1.95 to $2.08. Even at the lower forecast, though, these earnings would represent gains of 11 to 17 percent over the fiscal 2014 numbers, Monro noted.
The company now expects its sales for the year to be in the range of $900 to $910 million.
“Despite a difficult macro-economic environment,” Monro Pres- ident and CEO John Van Heel said, “consumers continued to turn to Monro as a trusted service provider to perform basic maintenance on their vehicles....”
Mr. Van Heel noted that while overall store traffic in the first half was up about 1 percent and comparable tire units were flat, comparable tire sales revenue fell 4 percent as consumers remained cautious and continued to trade down on higher ticket purchases.
“Looking forward, we expect this choppy market to continue in the short term,” he said, “but remain focused on driving top-line growth and leverage through acquisitions while aggressively managing costs in order to continue to deliver strong earnings growth.”
The company added 42 locations during the quarter, including the 35 Tire Choice stores and seven greenfield locations, while closing five stores, ending the quarter with 1,003 stores. (See related story on page 3).
Monro has added 63 locations via acquisition thus far in fiscal 2015, with combined annualized sales of approximately $75 million, representing roughly 9-percent annualized sales growth with an approximate 60/40 service/tires sales mix.
Mr. Van Heel concluded: “Our long-term view of the industry and our business remains positive. We continue to leverage our competitive advantages, including our strong balance sheet and low borrowing costs, to accelerate acquisitions in light of the difficult operating environment, lock in lower product costs by purchasing ahead of a potential tariff on imported tires and leverage our scale to negotiate favorable pricing with our vendors.
“Our full year expectations—of double-digit earnings growth and operating margin improvement of 100 to 150 basis points (excluding current year acquisitions), based on flat comparable store sales—reflects the benefits of our recent actions and flexibility of our unique business model.”