Monro downgrades fiscal 2020 sales, earnings outlook

ROCHESTER, N.Y. — Monro Inc. has downgraded its fiscal 2020 earnings and sales outlooks slightly, based on lower-than-expected sales growth through the first nine months of the fiscal year that ends March 28.

Based on current sales, business and economic trends, and taking into account recently completed acquisitions, Monro said it expects to report diluted earnings per share of $2.25 to $2.35, compared with the previous range of $2.45 to $2.55.

Likewise, fiscal 2020 sales are expected to be in the range of $1.28 billion to $1.29 billion, an increase of 6.2% to 7.5% versus fiscal 2019. Previously, the Rochester-based company had forecast fiscal 2020 sales of up to $1.32 billion.

"In light of year-to-date trends," Monro said in its third-quarter earnings report that comparable store sales likely will be down 1% to flat compared with the previous guidance of an increase of 1% to 2%.

Monro President and CEO Brett Ponton cited mild weather in late November and December as having had a negative impact on the company's performance, and said these conditions have continued into January, prompting the revised forecast.

"While we are not satisfied with our financial results, we remain confident in our path forward, though as we have said before, we know it will not be linear," he said, noting that the slowdown followed solid performances in October and early November.

For the quarter and nine months ended Dec. 28, Monro reported single-digit gains in operating income on 6.2% and 6.3% increases in sales, respectively.

Operating income in the third quarter rose 2.9% to $31.6 million on sales of $329.3 million, for an earnings ratio of 9.6%. The sales increase was driven by sales from new stores of $22.7 million, including sales from recent acquisitions of $20.7 million, Monro said.

Comparable store sales fell 0.9% in the period, Monro said, with revenue from tires and front end/shocks falling about 1% and 3% for brakes/alignments. Revenue from maintenance services was on par with the previous year.

The earnings ratio slipped due to higher fixed distribution and occupancy costs as a percentage of sales, partially offset by lower material costs as a percentage of sales.

Net income for the quarter fell 7.8% to $18.9 million.

During the quarter Monro added 27 company-operated stores, ending the period with 1,289 company-operated stores and 99 franchised locations.

For the nine-month period, operating income rose 3.1% to $101.3 million on sales of $970.5 million. Comparable store sales were down 0.1% versus 2.4% growth in the fiscal 2019 period. Net income for the nine months fell 1.7% to $61.8 million.

Commenting on the results, Mr. Ponton said Monro "focused on the elements within our business that we can control" and made great progress during the quarter on its strategic transformation.

The company continued moving forward with its "store refresh program," converting 74 Monro Muffler locations either to Mr. Tire or Tire Choice signage.

"We look forward to building upon this momentum as we further expand this initiative across our store base," Mr. Ponton said, "which combined with our other strategic initiatives, will drive a consistent, five-star experience for all of our customers.

"We believe we are well positioned to deliver sustainable, long-term value for our shareholders and are excited to capitalize on the significant opportunities ahead."

During the quarter, Monro completed the acquisition of previously announced acquisitions of 27 stores in California, that are expected to add roughly $45 million in annualized sales.

On a combined basis, acquisitions completed in fiscal 2020 represent an expected total of $120 million in annualized sales.