"Fiscal 2023 was a foundational year of investment that sets the stage for a brighter future in the year ahead and beyond," Broderick said. "While we have made substantial progress on the sales and cash-creation pillars of our overall strategy, we have significant opportunities ahead to expand our margins."
Broderick told financial analysts on a conference call that Monro anticipates being able to deliver mid-single-digit comparable sales growth by committing to a balanced approach between tire and service categories that will allow the firm to leverage its cost structure to deliver enhanced profitability.
"Our strategy and all of our initiatives are designed to restore our gross margins back to pre-COVID levels with double-digit operating margins over the longer-term," he said.
Comparable store sales in the quarter increased 4.5%, Monro said, driven by an approximate 7% comparable store sales increase in the company's small or underperforming stores. This compares to an increase in comparable store sales of 1.4% in the prior-year period.
Sales from new stores increased $2 million, primarily from recent acquisitions.
Comparable store sales, adjusted for days, increased approximately 15% for batteries, 11% for maintenance services and 5% for brakes and tires versus the prior-year period, Monro said, but fell approximately 3% for alignments and 4% for front end/shocks.
For the fiscal year ended March 25, Monro's operating income fell 21.2% to $79.8 million on 2.5% lower sales of $1.33 billion, yielding a 6% operating ratio. Net income dropped 36.7% to $39 million.
During the quarter, Monro acquired five stores, opened two and closed four, ending the period with 1,299 company-operated stores and 77 franchised locations.
Monro is projecting first-quarter fiscal 2024 revenue of $330 million to $335 million, as the company continues to drive productivity improvements throughout the store network, especially on the 300 stores identified as "small or underperforming."
The company also will focus on generating "significant cash flow" through improved profitability and working capital reductions and will continue to evaluate merger/acquisition opportunities as part of its overall capital expenditure program.
Monro did not comment on any specific pending acquisitions, but noted it sees "significant" growth prospects in the "attractive and dynamic Western region," and that it is evaluating a "robust pipeline of attractive M&A opportunities" that support our growth strategy. It stressed it has the financial flexibility "to continue to roll up attractive opportunities in a highly fragmented industry."
At the same time, Monro announced a package of governance enhancements, including an amendment to declassify our board of directors and simplify its capital structure through an agreement to eliminate Class C preferred stock.
"We believe these enhancements are in the best interests of all shareholders and we are confident that these steps will make Monro a more attractive investment opportunity," Broderick said.
"We will continue to assess potential actions to further improve our governance, including adding director candidates to our board who complement the skillsets and experience currently represented, and we will continue to seek active dialogue with our shareholder base to further these efforts."
