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October 20, 2016 02:00 AM

Monro's Q2 operating income falls

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    ROCHESTER, N.Y. (Oct. 20, 2016) — Monro Muffler Brake Inc.'s operating income fell 6.5 percent in the quarter ended Sept. 24 as revenue from new acquisitions pushed sales 3.9-percent higher to $248.6 million.

    Monro attributed the lower earnings of $31.9 million — down from $34.1 million the year prior — in part to costs associated with recent acquisitions, negative comparable store sales and sales mix shift to the lower margin tire and maintenance categories.

    Despite the lower earnings, President and CEO John Van Heel said Monro's “bottom-line focus, diligent cost control and successful integration of our recent acquisitions allowed us to deliver sales and earnings within our guidance range.”

    Monro noted that the second-quarter sales included $20.1 million in revenue from recently acquired stores, which helped offset 4.3-percent lower comparable sales from the existing store network.

    Courtesy of John Van Heel, LinkedIn

    Monro President and CEO John Van Heel

    This drop includes declines of approximately 2 percent for maintenance services, 6 percent for alignments and 13 percent for brakes and front end/shocks. Tire sales were unchanged.

    Monro added a net of 33 stores during the quarter, including 26 Clark Tire retail stores in North Carolina. The firm also opened 10 greenfield locations and closed three stores.

    The Clark Tire acquisition included four wholesale centers, which Monro said increased “significantly” its tire purchasing and distribution efficiencies. Monro expects Clark Tire to add approximately $85 million in annualized sales.

    On a combined basis, the Company's acquisitions completed and announced to date in fiscal 2017 are expected to add approximately $135 million in annualized sales and represent annualized sales growth of 14 percent over fiscal 2016.

    Additionally, the company said it expects fiscal 2017 acquisitions raise its tire purchases by approximately 25 percent, primarily due to the wholesale business, further strengthening its tire assortment opportunities and cost competitiveness.

    For the six-month period, operating earnings fell 6.6 percent to $63.2 million on 2.1-percent higher sales of $485.5 million.

    For the remainder of fiscal 2017, Mr. Van Heel said Monro sees the “opportunity for positive comparable store sales trends for the remainder of the year as prior year comparisons ease due to the mild winter weather throughout our markets last year.

    “In this challenging operating environment,” he continued, “we continue to leverage our flexible business model and pursue attractive acquisition opportunities we see in the marketplace.”

    In the first six months of this fiscal year, Monro added a net of 68 retail stores, two retread plants and four wholesale centers through acquisitions and greenfield growth.

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