Monro confident despite Q3 sales, earnings dip

ROCHESTER, N.Y. — Monro Inc. suffered double-digit drops in operating and net income for the quarter ended Dec. 23 as revenue slid 0.9 percent on lower comparable store sales.

Despite the sales and earnings declines, Monro President and CEO Brett Ponton expressed confidence for the fourth quarter and full fiscal year, noting that business was recovering thus far through the end of January.

Third quarter operating income fell 11.4 to $29.3 million on sales of $285.7 million, yielding a 10.3-percent operating ratio. Net income slid 34.1 percent to $11.6 million.

Monro said comparable store revenue fell 3.1 percent for the quarter, based on drops in sales of brakes (down 1 percent), maintentance services (3 percent), tires (4 percent) and alignments (5 percent). The drop in comparable store revenue was nearly balanced out by $6.4 million in sales from new stores, including recent acquisitions.

Operating income for the nine months was up 0.6 percent to $96.9 million on 9.5-percent higher sales of $842.2 million. Revenue from new stores accounted for nearly all of the gain, Monro said.

Net income was off 10.4 percent to $46.5 million.

During the quarter, Monro opened four and closed two stores, ending the quarter with 1,138 company-operated stores and 103 franchised locations. The company also signed a deal to acquire seven stores within the firm's existing market footprint.

Monro did not identify the stores but said they are expected to add approximately $7 million in annualized sales, with a sales mix of 45-percent service and 55-percent tires. The acquisition is expected to close in the fourth quarter.

Acquisitions completed and announced to date in fiscal 2018 are expected to add approximately $20 million in annualized sales and be breakeven to diluted earnings per share in fiscal 2018, Monro said.

During the quarter, Monro launched a number of "strategic initiatives" to drive improvement, Mr. Ponton said.

"By placing a renewed focus on the customer and introducing new training, technology and data-driven analytics in critical areas of the business, we will significantly strengthen our sales execution and drive operational efficiency," he added.

For the fiscal year ending March 31, Monro anticipates sales to be in the range of $1.12 billion to $1.14 billion, an increase of 10 to 11 percent over fiscal 2017 sales. Fiscal 2018 sales guidance assumes a comparable store sales decrease of 0.5 percent.

Fiscal 2018 diluted earnings per share are expected in a range of $1.88 to $1.93, reflecting revised comparable store sales guidance and other factors.