- First Quarter Sales Decreased to $327.0 Million, due to the
Divestiture of Wholesale Tire and Distribution Assets in First
Quarter Fiscal 2023
- First Quarter Comparable Store Sales Increased 0.5%
- First Quarter Diluted EPS of $.28; Adjusted Diluted EPS1 of
$.31
- Generated Cash from Operating Activities of $72 Million
- Distributed First Quarter Fiscal 2024 Cash Dividend of $.28 per
Share
- Released Third Annual Environmental, Social & Governance
(ESG) Report
Monro, Inc. (Nasdaq: MNRO), a leading provider of automotive
undercar repair and tire services, today announced financial
results for its first quarter ended June 24, 2023.
First Quarter
Results2
Sales for the first quarter of the fiscal year ending March 30,
2024 (“fiscal 2024”) decreased 6.5% to $327.0 million, as compared
to $349.5 million for the first quarter of the fiscal year ended
March 25, 2023 (“fiscal 2023”). The total sales decline of $22.5
million was due to the divestiture of the Company’s Wholesale tire
and distribution assets in the first quarter of fiscal 2023. Sales
for these divested assets were $23.9 million in the first quarter
of fiscal 2023. Comparable store sales increased 0.5% for the
period, driven by an approximate 1% comparable store sales increase
in approximately 300 of the Company’s small or underperforming
stores. This compares to an increase in comparable store sales of
2.8% in the Company’s Retail locations in the prior year period.
Sales from new stores increased $1.6 million, primarily from recent
acquisitions.
Comparable store sales increased approximately 18% for
batteries, 3% for maintenance services and 1% for tires compared to
the prior year period. Comparable store sales decreased
approximately 2% for brakes and alignments and 9% for front
end/shocks. Please refer to the “Comparable Store Sales” section
below for a discussion of how the Company defines comparable store
sales.
Gross margin was flat compared to the prior year period,
primarily resulting from 220 basis points of benefit from both the
divestiture of the Company’s Wholesale tire and distribution assets
as well as lower distribution and occupancy costs as a percentage
of sales, which were entirely offset by higher material costs and
higher technician labor costs due to an incremental investment in
technician headcount as well as wage inflation.
Total operating expenses for the first quarter of fiscal 2024
were $97.0 million, or 29.7% of sales, as compared to $95.9
million, or 27.4% of sales in the prior year period. The increase
as a percentage of sales was principally due to the sales decline
resulting from the divestiture of the Company’s Wholesale tire and
distribution assets, costs related to shareholder matters from the
Company’s planned equity capital structure recapitalization as well
as transition costs related to the Company’s back-office
optimization in the current year and a net gain on the sale of the
Company’s Wholesale tire and distribution assets in the prior year
period.
Operating income for the first quarter of fiscal 2024 was $17.4
million, or 5.3% of sales, as compared to $26.3 million, or 7.5% of
sales in the prior year period.
Interest expense was $5.2 million for the first quarter of
fiscal 2024, as compared to $5.7 million for the first quarter of
fiscal 2023, principally due to a decrease in weighted average
debt.
Income tax expense in the first quarter of fiscal 2024 was $3.4
million, or an effective tax rate of 27.6%, compared to $8.1
million, or an effective tax rate of 39.6% in the prior year
period. The higher effective tax rate in the prior year period was
primarily due to discrete tax impacts related to the divestiture of
the Company’s Wholesale tire locations and tire distribution
operations as well as the revaluation of deferred tax balances due
to changes in the mix of pre-tax income in various U.S. state
jurisdictions because of the divestiture.
Net income for the first quarter of fiscal 2024 was $8.8
million, as compared to $12.5 million in the same period of the
prior year. Diluted earnings per share for the first quarter of
fiscal 2024 was $.28, compared to $.37 in the first quarter of
fiscal 2023. Adjusted diluted earnings per share, a non-GAAP
measure, for the first quarter of fiscal 2024 was $.31. This
compares to adjusted diluted earnings per share of $.42 in the
first quarter of fiscal 2023. Please refer to the reconciliation of
adjusted diluted earnings per share in the table below for details
regarding excluded items in the first quarters of fiscal 2024 and
2023. Please refer to the “Non-GAAP Financial Measures” section
below for a discussion of this non-GAAP measure.
During the first quarter of fiscal 2024, the Company did not
open or close any stores. Monro ended the quarter with 1,299
company-operated stores and 77 franchised locations.
“Our first quarter comparable store sales growth of less than 1%
fell short of our expectations. The shortfall was primarily driven
by lower-than-expected sales due to customer deferrals in some of
our key service categories in June. Broad-based inflationary
pressures have persisted such that the consumer slowed their
purchases of some of our higher-ticket service categories. While
our comps in the quarter fell short of expectations, customer
traffic counts were in-line with our expectations and remained
consistent with improving traffic trends in the back half of fiscal
2023. Tire margins returned to solid footing, but our overall gross
margin in the quarter was impacted by a lower-sales mix of our
high-margin service categories. This resulted in higher material
costs and continued labor cost pressures as a percentage of sales,
relative to our expectations. As a result, we took swift actions to
reduce non-productive labor costs, including overtime hours in our
stores, which allowed us to preserve margins and profitability.
While we will likely need to see an improvement in the overall
health of the consumer before we can fully capitalize on
longer-term industry tailwinds, we will remain relentlessly focused
on achieving our mid-single-digit comp store sales expectations
through accelerating growth in our 300 small or underperforming
stores, maintaining a balanced approach between tire and service
categories with competitive pricing to drive store traffic and
continuously improving our customer experience. Encouragingly, our
preliminary comp store sales for fiscal July are up approximately
1%, which is a positive rebound off of the sales trends that we saw
in fiscal June and a step in the right direction. We will also
strive to expand our gross margins through appropriate staffing and
properly training our Teammates to maximize their productivity.
Given the current pressures on the consumer, we are also laser
focused on maximizing profitability through prudent cost control,
which includes right sizing our fixed costs and rationalizing
unproductive labor. While we take these actions, we will not cut
productive labor at the sacrifice of our standards and to the
detriment of our long-term service model. In addition, we will
continue to create cash by optimizing inventory and leveraging the
strength of our vendor partners for better availability, quality
and cost of parts and tires in our stores," said Mike Broderick,
President and Chief Executive Officer.
Broderick continued, “Our business is well-positioned, and we
are confident that we remain on a path to restore our gross margins
back to pre-COVID levels with double-digit operating margins over
the longer-term.”
Strong Financial
Position
During the first quarter of fiscal 2024, the Company generated
operating cash flow of approximately $72 million. As of June 24,
2023, the Company had cash and cash equivalents of approximately
$15 million and availability on its revolving credit facility of
approximately $505 million.
First Quarter Fiscal 2024 Cash
Dividend
On June 19, 2023, the Company paid a cash dividend for the first
quarter of fiscal 2024 of $.28 per share.
Share Repurchases
The Company maintains a share repurchase program authorizing the
Company to repurchase up to $150 million of its common stock, with
approximately $53 million remaining for future repurchases.
The Company may repurchase shares of common stock from time to
time as market conditions warrant, subject to regulatory
considerations.
The method, timing and actual number of shares repurchased will
depend on a variety of factors, including price, general business
and market conditions, alternative investment opportunities, and
legal requirements.
The Company’s repurchase program has no expiration date, does
not require the purchase of any minimum number of shares and may be
suspended, modified or discontinued at any time without prior
notice.
Environmental, Social & Governance
(ESG)
Monro recently released its third annual ESG Report, which
covers fiscal year 2023. The report highlights the actions Monro is
taking every day to create an inclusive and thriving culture for
its teammates, deliver world class service for its guests,
positively impact the communities where it operates, and make
sustainable decisions for the environment. The report is available
on the Company’s corporate website at
https://corporate.monro.com/esg/default.aspx.
Company Outlook
Monro is not providing fiscal 2024 financial guidance at this
time but will provide perspective on its outlook for fiscal 2024
during its earnings conference call.
Earnings Conference Call and
Webcast
The Company will host a conference call and audio webcast on
Wednesday, July 26, 2023 at 8:30 a.m. Eastern Time. The conference
call may be accessed by dialing 1-833-470-1428 and using the
required access code of 006236. A replay will be available
approximately two hours after the recording through Wednesday,
August 9, 2023 and can be accessed by dialing 1-866-813-9403 and
using the required access code of 528262. A replay can also be
accessed via audio webcast at the Investors section of the
Company’s website, located at corporate.monro.com/investors.
About Monro, Inc.
Monro, Inc. (NASDAQ: MNRO) is one of the nation’s leading
automotive service and tire providers, delivering best-in-class
auto care to communities across the country, from oil changes,
tires and parts installation, to the most complex vehicle repairs.
With a growing market share and a focus on sustainable growth, the
Company generated approximately $1.3 billion in sales in fiscal
2023 and continues to expand its national presence through
strategic acquisitions and the opening of newly constructed stores.
Across approximately 1,300 stores and 9,000 service bays
nationwide, Monro brings customers the professionalism and
high-quality service they expect from a national retailer, with the
convenience and trust of a neighborhood garage. Monro’s highly
trained teammates and certified technicians bring together hands-on
experience and state-of-the-art technology to diagnose and address
automotive needs every day to get customers back on the road
safely. For more information, please visit corporate.monro.com.
Cautionary Note Regarding
Forward-Looking Statements
The statements contained in this press release that are not
historical facts may contain statements of future expectations and
other forward-looking statements made pursuant to the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements can be identified by such words and
phrases as “expect,” “estimate,” “guidance,” “outlook,” ”project,”
“strategy,” “strive,” “anticipate,” “believe,” “could,” “may,”
“will,” “intend,” and other similar words or phrases.
Forward-looking statements are subject to risks, uncertainties and
other important factors that could cause actual results to differ
materially from those expressed. These factors include, but are not
necessarily limited to product demand, dependence on and
competition within the primary markets in which the Company’s
stores are located, the need for and costs associated with store
renovations and other capital expenditures, realizing the
anticipated benefits of the divestiture of the Company’s wholesale
tire and distribution assets, the effect of general business or
economic conditions on the Company’s business, including consumer
spending levels, inflation, and unemployment, seasonality, changes
in the U.S. trade environment, including the impact of tariffs on
products imported from China, the impact of competitive services
and pricing, product development, parts supply restraints or
difficulties, the impact of weather trends and natural disasters,
industry regulation, risks relating to leverage and debt service
(including sensitivity to fluctuations in interest rates),
continued availability of capital resources and financing, risks
relating to protection of customer and employee personal data,
risks relating to litigation, risks relating to integration of
acquired businesses and other factors set forth elsewhere herein
and in the Company’s Securities and Exchange Commission filings,
including the Company’s annual report on Form 10-K for the fiscal
year ended March 25, 2023. Except as required by law, the Company
does not undertake and specifically disclaims any obligation to
update any forward-looking statement to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date
of such statements.
Non-GAAP Financial
Measures
In addition to reporting diluted earnings per share (“EPS”),
which is a generally accepted accounting principles (“GAAP”)
measure, this press release includes adjusted diluted EPS, which is
a non-GAAP financial measure. The Company has included a
reconciliation from adjusted diluted EPS to its most directly
comparable GAAP measure, diluted EPS. Management views this
non-GAAP financial measure as a way to better assess comparability
between periods because management believes the non-GAAP financial
measure shows the Company’s core business operations while
excluding certain non-recurring items such as costs related to
shareholder matters from the Company’s planned equity capital
structure recapitalization, transition costs related to the
Company’s back-office optimization and items related to store
closings as well as acquisition initiatives.
This non-GAAP financial measure is not intended to represent,
and should not be considered more meaningful than, or as an
alternative to, its most directly comparable GAAP measure. This
non-GAAP financial measure may be different from similarly titled
non-GAAP financial measures used by other companies.
Comparable Store Sales
The Company defines comparable store sales as sales for
locations that have been opened or owned at least one full fiscal
year. The Company believes this period is generally required for
new store sales levels to begin to normalize. Management uses
comparable store sales to assess the operating performance of the
Company’s stores and believes the metric is useful to investors
because the Company’s overall results are dependent upon the
results of its stores.
Source: Monro, Inc. MNRO-Fin
MONRO, INC.
Financial Highlights
(Unaudited)
(Dollars and share counts in
thousands)
Quarter
Ended Fiscal
June
2023
2022
% Change
Sales
$
326,968
$
349,535
(6.5
%)
Cost of sales, including distribution and
occupancy costs
212,572
227,346
(6.5
%)
Gross profit
114,396
122,189
(6.4
%)
Operating, selling, general and
administrative expenses
97,047
95,934
1.2
%
Operating income
17,349
26,255
(33.9
%)
Interest expense, net
5,208
5,658
(8.0
%)
Other income, net
(58
)
(78
)
(25.6
%)
Income before income taxes
12,199
20,675
(41.0
%)
Provision for income taxes
3,370
8,191
(58.9
%)
Net income
$
8,829
$
12,484
(29.3
%)
Diluted earnings per share
$
0.28
$
0.37
(24.3
%)
Weighted average number of diluted shares
outstanding
31,954
33,986
Number of stores open (at end of
quarter)
1,299
1,303
MONRO, INC.
Financial Highlights
(Unaudited)
(Dollars in thousands)
June 24,
March 25,
2023
2023
Assets
Cash and equivalents
$
15,316
$
4,884
Inventories
141,165
147,397
Other current assets
94,116
106,186
Total current assets
250,597
258,467
Property and equipment, net
300,097
304,989
Finance lease and financing obligation
assets, net
207,056
217,174
Operating lease assets, net
208,562
211,101
Other non-current assets
787,705
785,146
Total assets
$
1,754,017
$
1,776,877
Liabilities and Shareholders’
Equity
Current liabilities
$
480,677
$
449,177
Long-term debt
65,000
105,000
Long-term finance leases and financing
obligations
281,933
295,281
Long-term operating lease liabilities
188,624
191,107
Other long-term liabilities
42,615
41,390
Total liabilities
1,058,849
1,081,955
Total shareholders’ equity
695,168
694,922
Total liabilities and shareholders’
equity
$
1,754,017
$
1,776,877
MONRO, INC.
Reconciliation of Adjusted
Diluted Earnings Per Share (EPS)
(Unaudited)
Quarter Ended Fiscal
June
2023
2022
Diluted EPS
$
0.28
$
0.37
Net gain on sale of wholesale
tire and distribution assets (a)
−
(0.03
)
Costs related to shareholder
matters
0.02
−
Transition costs related to
back-office optimization
0.01
−
Certain discrete tax items
(c)
−
0.08
Adjusted Diluted EPS
$
0.31
$
0.42
Note: The calculation of the impact of non-GAAP adjustments on
diluted earnings per share is performed on each line independently.
The table may not add down by +/- $0.01 due to rounding.
Supplemental Reconciliation of
Adjusted Net Income
(Unaudited)
(Dollars in Thousands)
Quarter Ended Fiscal
June
2023
2022
Net Income
$
8,829
$
12,484
Net gain on sale of wholesale
tire and distribution assets (a)
−
(1,180
)
Store closing costs
47
(4
)
Monro.Forward initiative
costs
−
23
Acquisition due diligence and
integration costs
5
(10
)
Costs related to shareholder
matters
836
−
Transition costs related to
back-office optimization
544
−
Provision for income taxes on
pre-tax adjustments (b)
(359
)
293
Certain discrete tax items
(c)
−
2,644
Adjusted Net Income
$
9,902
$
14,250
a)
Amount includes gain on sale of
wholesale tire locations and distribution assets, net of closing
costs and costs associated with the closing and sale of a related
warehouse.
b)
The Company determined the
Provision for income taxes on pre-tax adjustments by calculating
the Company’s estimated annual effective tax rate on pre-tax income
before giving effect to any discrete tax items and applying it to
the pre-tax adjustments.
c)
Amount relates to the sale of
wholesale tire locations and distribution assets, as well as the
revaluation of deferred tax balances due to changes in the mix of
pre-tax income in various U.S. state jurisdictions as a result of
the sale.
1 Adjusted diluted EPS is a non-GAAP measure. Please refer to
the “Non-GAAP Financial Measures” section below for a discussion of
this non-GAAP measure. 2 Financial performance for prior year
includes the results of divested Wholesale tire and distribution
assets through June 16, 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230726685991/en/
Investors and Media: Felix Veksler Senior Director, Investor
Relations ir@monro.com
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