ROCHESTER, N.Y. — Monro Inc. suffered a 98.6% drop in operating income and reported a net loss for the quarter ended March 31 on 0.4% lower sales, as the retailer suffered the double impact of a mild winter in the first part of the quarter and the early stages of COVID-19-related business interruption in the latter weeks.
The weaker fourth quarter impacted the firm's fiscal 2020 results as well. Operating income for the year fell 19.8% to $101.7 million, while sales revenue increased 4.7% to a record $1.26 billion. Net income fell 27.2% to $58 million.
Monro noted the revenue increase was driven by first-time sales from acquisitions throughout the year. Otherwise, comparable store sales dropped 2.3% throughout the year, with sales drops of approximately 1% for brakes, 2% for tires and maintenance services and 3% for alignments and front end/shocks compared with the prior year.
The fourth-quarter operating profit of $404,000 represented 0.1% of the $286.1 million in sales, versus a 9.9% operating ratio a year earlier. The net loss was $3.78 million, compared with net income of $16.8 million in fiscal 2019.
During the fourth quarter, the company opened three and closed nine company-operated stores, ending the quarter with 1,283 company-operated stores and 98 franchised locations. The company closed six "underperforming" stores during the quarter and has identified 36 others it expects to close during the first and second quarters of the current fiscal year.
Monro President and CEO Brett Ponton noted that Monro's fourth-quarter performance was challenged by mild winter weather conditions in January and February, and then experienced a "substantial drop" in traffic due to the impact of the COVID-19 restrictions in the second half of March.
Mr. Ponton went on to say operations were "significantly" impacted by COVID-19 in April and into May, with comparable store sales declines of approximately 41% and 24%, respectively, versus the prior year periods.
However, he said, "We are encouraged by the gradual improvement in traffic we have seen towards the end of May as stay-at-home orders are lifted across the nation. While we navigate this uncertain environment, we are focused on the elements of the business within our control, including advancing our Monro.Forward initiatives as we look forward to continuing to deliver long-term, sustainable value once the pandemic subsides."
Monro at this time did not offer a specific forecast for the remainder of fiscal 2021, but did say it has suspended for now all merger-and-acquisition activity.
Regarding the COVID-19 pandemic and its effect on operations, the company stressed that its stores had been deemed essential services and continue to operate on reduced hours, even in states where "stay-at-home" orders remain in place.
The company reiterated that its top priority continues to be the health and safety of its employees and customers, and to that end, it has implemented stringent safety protocols, robust sanitation and cleaning measures, and contactless services, Where possible, employees are working remotely and employees who were directly affected by the virus were offered extended paid time-off.
To maximize its financial flexibility, Monro drew down the remaining $350 million from its revolving credit facility at the end of March. Cash and cash equivalents are approximately $375 million as of May 26.
With a solid balance sheet and ample liquidity, Monro said it believes it is well-positioned to navigate the current environment.