Monro's next growth target: commercial

ROCHESTER, N.Y. (May 19, 2016) — Monro Muffler Brake Inc. is targeting the commercial tire sector as its next growth vehicle, starting in Florida where its acquisition of McGee Auto Service & Tires includes two commercial outlets and a retread plant.

“We're planning to grow this business in Florida,” Monro President and CEO John Van Heel told financial analysts today in a conference call covering Monro's fiscal 2016 results.

Mr. Van Heel noted that roughly one-third of McGee Auto's business — which Monro put at about $50 million on an annualized basis — is considered commercial.

“This could lead us to expansion of commercial business in other markets as well,” he said, noting that a number of companies Monro is evaluating for possible takeover have commercial business interests as well.

During the question-and-answer period of the conference call, Mr. Van Heel said Monro plans to concentrate its commercial efforts initially on the Florida market, where the McGee deal gave it a platform to build on.

“We see significant opportunities” for this business in Florida and elsewhere, he said.

Overall, Mr. Van Heel said Monro has 10 non-disclosure agreements in place with dealers within its existing marketing footprint, representing five to 40 stores each.

Mr. Van Heel said Monro expects to close a higher-than-normal number of these deals this year in light of an uncertain U.S. economy and the specter of higher taxes “regardless of who's elected president” later this year.

In addition, Monro is looking at opening 20 to 40 Greenfield stores this year within its existing footprint, mostly through purchase of one- to three-store operations. These new stores will replace some of the eight “underperforming” stores closed in the past year.

The last time Monro bought a business with measurable commercial assets was in 2012 with Kramer Tire Co. in Virginia. In that case, Monro turned around a few months later and sold the Kramer commercial assets to Colony Tire Inc. as part of its deal to buy Colony's retail stores in North Carolina and Virginia.

The McGee Auto acquisition pushes Monro's presence in Florida to 83 stores, representing about $115 million in annualized sales, the company said. The McGee stores boost Monro's presence in the greater Tampa Bay and Fort Myers areas, while also expanding into Daytona and Tallahassee.