ROCHESTER, N.Y. — Monro Inc. reported a 10% jump in operating income for the quarter ended June 29 on 7.2% higher sales, based almost entirely on revenue from newly acquired stores.
Net income rose 9.5 % to $22.6 million on record sales of $317.1 million for the company's first quarter of fiscal 2020.
Monro disclosed it has agreed to buy eight as-yet-unidentified stores in Louisiana in a deal that is expected to close in the second quarter. The acquisitions — in addition to the 12-store Allied Discount Tire & Brake purchase concluded in April recently — are expected to add about $12 million in annualized sales, representing a sales mix of 50% service and 50% tires, the company said.
The first-quarter sales increase was driven by a comparable store sales increase of 0.8% and sales from new stores of $19.6 million, including sales from recent acquisitions of $16.6 million, the company said.
Comparable store sales increased about 6% for brakes, 2% for alignments and 1% for tires, and decreased about 1% for front end/shocks and 2% for maintenance services.
The company said it benefited from initiatives to optimize its product and service offerings and store staffing model and from leveraging higher comparable store sales, partially offset by the impact of sales mix from the Free Service Tire acquisition in 2018.
Operating income for the first quarter jumped 10% to $36.4 million, or 11.5% of sales, compared with the year-ago quarter.
During the first quarter Monro added 55 company-operated stores and closed one, ending the quarter with 1,251 company-operated stores and 98 franchised locations.
"We entered fiscal 2020 with continued momentum as we achieved our sixth consecutive quarter of comparable store sales growth, and are pleased to report this performance has extended through July with comparable store sales up approximately 1% month-to-date," Monro President and CEO Brett Ponton said.
"Our solid performance despite cold and wet spring weather in certain regions reflects improved in-store execution across our business as well as the continued traction of our Monro.Forward initiatives, which are progressing on schedule. We are particularly encouraged by the outperformance of our reimaged stores where we delivered notable improvements in comparable store sales and guest satisfaction ratings during the quarter," he said.
"Looking ahead, we believe we are well-positioned to continue to expand our store footprint in attractive markets and capitalize on our robust pipeline of opportunities. While we remain fully confident in our expectations for the remainder of the fiscal year, we are updating our full year comparable store sales guidance range to reflect the unfavorable weather conditions in certain regions that tempered our top-line performance in the first quarter, while we are reiterating our diluted earnings per share guidance. Overall, we believe our customer-focused strategy and commitment to operational excellence combined with our disciplined acquisition strategy will enable us to deliver sustainable long-term growth and value creation for our shareholders."
The acquisition of Certified Tire's 40 retail stores, located in San Francisco, San Diego and Los Angeles, and one distribution center in Riverside, Calif., represents entry into a new state for Monro and expands the company's geographic footprint to the West Coast. The acquisition is expected to add approximately $45 million in annualized sales, representing a sales mix of 70% service and 30% tires.
During the first quarter, Monro also completed the acquisition of two additional stores in California, which are expected to add about $3 million in annualized sales.
The acquisition of Allied Discount's 12 retail locations in Louisiana also presented entry into a new state for Monro. These locations — which are expected to start using Monro's Tire Choice brand — are expected to add about $15 million in annualized sales, representing a sales mix of 35% service and 65% tires.
On a combined basis, acquisitions completed and announced in fiscal 2020 so far represent an expected total of $75 million in annualized sales.
Monro said it now anticipates fiscal 2020 sales to be in the range of $1.29 billion to $1.32 billion, an increase of 7.1% to 9.6%, compared with fiscal 2019 sales.
Comparable store sales has been revised to an anticipated increase of 1% to 3%, compared with the previous guidance of an increase of 2% to 4%.