ROCHESTER, N.Y. — Coming off a strong fiscal first quarter, Monro Inc. continues to focus on growth, not only in sales and its ever widening footprint, but also for its workforce.
That was the message from Monro President and CEO Mike Broderick and Chief Financial Officer Brian D'Ambrosia during their conference call on July 28 after the release of the company's Q1 2022 financials. The Rochester-based tire services and vehicle repair company reported that it set a record with $341.8 million in sales in the quarter ended March 26, an increase of 38.4% from the same period last year.
And the executives reiterated once again that Monro will continue to look for opportunities to grow its store count — now numbering 1,291 company-operated stores and 91 franchised locations — whether that is through "partnerships" with dealers looking to sell, or building locations from the ground up, particularly in the Southwest U.S.
During the quarter, the company said it opened 30 company-operated stores while closing two. Last April, Monro finalized its acquisition of Rancho Cucamonga, Calif.-based Mountain View Tire & Auto Service Inc., which includes 30 retail stores in the Los Angeles area. That deal grew Monro's California footprint to 76 stores.
"Our strong cash flow and solid financial position affords us the opportunity to take advantage of strategic and value accretive consolidation opportunities in our fragmented industry," Mr. Broderick said in prepared remarks during the conference call.
"Strategically located acquisitions with attractive valuations remain a cornerstone of our growth strategy. We have a robust acquisition pipeline, and we are well-positioned to take advantage of the many opportunities for consolidation in our industry."
Mr. Broderick said "there's a lot of activity going on right now," but declined to provide specifics.
Mr. D'Ambrosia said the company continues on a similar pace for acquisition.
"The level of activity is strong, and historical multiples are still within the ranges of where we've been or current multiples are still in the range of where we've been historically," he said.
The company also has plans to build, especially in Colorado, Arizona, Texas and California, where Mr. Broderick said he recently spent time in greenfields.
"The biggest upside is literally you're creating a best-in-class experience," he said. "You have your model, it's just really clean. It's a beautiful looking store, and it has been built to be very efficient ... we're not dealing with 30-year-old problems."
He called greenfield stores "a shiny penny" for both workers and customers, but the focus remains, he said, on rebranding the California acquisitions "so that we've a best-in-class environment for not only our customers, but also for our teammates."
The executives emphasized Monro will continue to recruit and develop technicians to add to its workforce, especially as it attempts to reduce increased technician overtime brought about by the uptick in post-pandemic business. Monro employs more than 5,000 technicians.
"It is our goal to be the employer of choice in the automotive service industry, and our deep bench of talented technicians is paramount to our success as an organization," Mr. Broderick said.
Monro's online training platform, Monro University, is tantamount to that strategy.
"Our continued investment in highly trained and certified technicians is a key tenant of our employer value proposition and an important differentiator in the industry," he said. "Since the beginning of fiscal '22, we have continued to hire new technicians to match the surge in customer demand and to ensure we have optimal staffing levels in our stores to meet the continued growth in our service categories."
Mr. Broderick said Monro will focus on staffing "hotspots" with "qualified technicians that can do all jobs both around the wheel and under hood, because that's where the business is going. That is what our customers expect from a full service provider."
Monro recently added two industry veterans to its executive team: Matt Henson is the chief human resource officer, and David Nichols has been hired as senior vice president of marketing and category management.
Mr. Broderick, an ex-Advance Auto Parts executive, was named Monro's CEO April 5, filling positions left vacant by the August 2020 resignation of Brett Ponton. He said that Monro's momentum has continued into July, as sales are up 15%.
Monro reported that in Q1, comparable store sales increased approximately 57% for brakes, 54% for alignments, 42% for maintenance services, 40% for front/end shocks and 25% for tires, compared with the previous year.
Mr. D'Ambrosia said Monro has experienced an 8% year-over-year increase in gross profit for tires, illustrating, he said, "that category management tool and our attention to managing the tire category is allowing us to navigate any inflation that we may be seeing."
While Mr. Broderick said Monro will continue to push tire sales, he said the big takeaway is that the company is reaping benefits from its focus on service.
"We love selling tires," he said. "But we love selling service, and our service business now is getting the attention and the focus forward to continue to grow, and that should enable consistent comp sales growth quarter-over-quarter and also significant margin improvement," he said.
Monro reported that total sales increased $94.7 million during the quarter, resulting from a comparable store sales increase of 34.5% for the period and an increase in sales from new stores of $14.1 million, including sales from recent acquisitions of $13.6 million.
Net income for the first quarter of fiscal 2022 was $15.7 million, or 46 cents per diluted earnings per share, compared with $3 million, or 9 cents per diluted earnings share, in the previous year's quarter.
Monro posted operating income for Q1 of $27.9 million, or 8.2% of sales, as compared to $11.4 million, or 4.6% of sales in the year-ago period. Excluding litigation settlement costs, operating income for the first quarter was $31.8 million, or 9.3% of sales.
Monro generated $63 million in operating cash flow, allowing it to support its business operations, its Monro.Forward initiatives and invest in "attractive acquisition opportunities intended to drive long-term sustainable growth while paying down debt and returning cash to shareholders through its dividend program."
As of June 26, Monro had cash and cash equivalents of $17 million and availability on its revolving credit facility of approximately $372 million.
Gross profit increased to $126 million, an increase of 44% from the Q1 of fiscal 2021, from nearly $87 million.
Monro recently released its inaugural corporate responsibility report, called Monro.Forward Responsibly, which covers fiscal year 2021. It highlights actions the company has taken to help employees and customers, while making a positive impact on the communities where it operates, and act as a good steward of the environment.
"This is an exciting time to be part of Monro," Mr. Broderick said. "We've a strong foundation to build upon to create long-term value for our stakeholders."
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