ROCHESTER, N.Y. — Monro Inc. is reporting double-digit drops in sales and earnings for the quarter ended March 27, with sales in the first weeks of the current quarter continuing to trail the comparable 2019 period by double digits.
At the same time, Monro reports it has struck a deal to buy Allen Tire Co., a longtime Goodyear dealer with 17 stores in Southern California, to bolster its burgeoning network of stores in the Far West. The acquisition is expected to generate $20 million in annualized sales, with a 60/40 tires/auto service mix.
Financial terms of the deal, expected to close before year-end, were not disclosed.
Operating income for the quarter fell nearly 37% to $24.4 million on 11% lower sales revenue of $288.6 million, dropping the earnings ratio two points to 8.5%. Net income fell 36.9% to $12.8 million.
Monro attributed to the sales decline to an 11.4% drop in comparable store sales compounded by $6.5 million in lost sales from stores closed during the period due to local COVID-19 restrictions. These declines were offset partially by first-time revenue of $9.4 million from new stores, predominantly from recent acquisitions.
The decline in comparable store sales was driven primarily by reduced store traffic related to the ongoing COVID-19 pandemic and its negative impact on vehicle miles traveled in the second quarter.
Comparable store sales were down approximately 3% for tires, 16% for alignments, 19% for maintenance services and front end/shocks and 24% for brakes versus the prior-year period, Monro said.
The company "strategically" added hours of operation throughout the quarter at locations where demand improved, Monro said, while at the same time "right-sizing" store staffing levels since the beginning of the pandemic and added staffing back to its stores as demand improved.
Actively managing store operating hours and staffing levels to match demand has been instrumental to the company's profit and cash flow performance.
For the six-month period, operating income dropped 48.7% to $35.9 million on 16.5% lower sales of $535.6 million, cutting the operating ratio four points to 6.7%. Net income fell 63.2% to $15.8 million.
During the quarter, Monro closed six company-operated stores, including five that are considered temporary as a result of damage sustained during Hurricane Laura in Louisiana and Tropical Storm Isaias in the Northeast.
At the same time, Monro opened one company-operated store, ending the quarter with 1,242 company-operated stores and 97 franchised locations.
Looking ahead, Monro said it has 10 non-disclosure agreements pending covering possible acquisitions of four to 10 stores each.
The company declined to offer earnings guidance for the remainder of its fiscal year due to the ongoing uncertainty caused by COVID-19.