Monro, Inc. Announces Third Quarter Fiscal 2024 Financial Results
- Generated $130 million from operating activities in the first nine months of fiscal 2024
- Repurchased ~1.5M shares of common stock at an average price of $28.50 for $44 million
- Distributed a third quarter fiscal 2024 cash dividend of $.28 per share
- Sales for the third quarter of fiscal 2024 decreased 5.2% to $317.7 million
- Comparable store sales decreased 6.1% for the period
Insights
The reported decrease in third-quarter sales by Monro, Inc. reflects a challenging macroeconomic environment, particularly for the low-to-middle income consumer segment. The 6.1% decline in comparable store sales, especially in high-ticket items like tires, indicates a consumer base that is increasingly price-sensitive and likely to defer non-essential purchases. This behavior aligns with broader economic trends where consumers prioritize essential spending amidst inflationary pressures and economic uncertainty.
The gross margin improvement, despite the sales decrease, is a positive indicator of effective cost management, particularly in lowering material and technician labor costs. However, the increase in operating expenses as a percentage of sales is a concern and could indicate inefficiencies or rising costs that are not being fully offset by the company's cost reduction strategies. The reduction in interest expenses due to lower average debt is a positive sign and reflects prudent financial management.
Monro's stock repurchase program, with the repurchase of 1.5 million shares, signals confidence by management in the company's intrinsic value. However, investors should consider the opportunity cost of such buybacks and whether these funds could be more effectively deployed elsewhere in the business, especially during times of decreased sales and uncertain market conditions.
The automotive repair and tire service industry is heavily influenced by seasonal and economic factors. Monro's decline in comparable store sales is partially attributed to milder weather, which can reduce the immediate need for certain automotive services. Additionally, the trend of consumers deferring purchases in high-ticket categories like tires is a reflection of broader consumer behavior in the automotive sector. It is crucial for Monro to adapt to these consumer patterns and adjust their inventory and pricing strategies accordingly.
The company's efforts to maintain market share in higher-margin tire tiers, despite industry-wide slowdowns, suggest a strategic focus on profitability over volume. This approach, if successful, can help cushion the impact of reduced sales volume. However, the reliance on manufacturer-funded promotions and the increase in lower-margin tire sales could potentially dilute margins over time.
Monro's focus on improving underperforming stores and balancing tire and service offerings is a strategic move to enhance customer experience and drive traffic. The company's ability to navigate the current macro-economic pressures and position itself for margin restoration to pre-COVID levels will be critical for long-term success.
The financial results of Monro, Inc. provide insight into the discretionary spending habits of consumers, particularly within the automotive service industry. The reported decline in sales and comparable store sales can be interpreted as a microcosm of the wider economic landscape, where consumers may be experiencing financial strain due to inflation or stagnant wage growth, leading to deferral of non-urgent expenses such as vehicle maintenance.
Monro's strategy to optimize its cost structure and improve gross margins despite these headwinds is indicative of an adaptive response to a challenging economic environment. The company's ability to generate significant operating cash flow while maintaining a strong liquidity position with cash and available credit suggests a solid financial foundation that could be leveraged for future growth or to weather further economic turbulence.
The long-term outlook, with aspirations for double-digit operating margins, suggests confidence in the company's strategic initiatives and the broader economic recovery. However, the absence of fiscal 2024 guidance denotes a cautious approach, likely reflecting the current economic uncertainties and the unpredictable nature of consumer spending patterns.
-
Third Quarter Sales Decreased to
$317.7 Million -
Third Quarter Comparable Store Sales Decreased
6.1% -
Third Quarter Diluted EPS of
$.38 ; Adjusted Diluted EPS1 of$.39 -
Generated Cash from Operating Activities of
$130 Million -
Repurchased ~1.5M Shares of Common Stock at an Average Price of
$28.50 $44 Million -
Distributed Third Quarter Fiscal 2024 Cash Dividend of
$.28 per Share
Third Quarter Results
Sales for the third quarter of the fiscal year ending March 30, 2024 (“fiscal 2024”) decreased
Comparable store sales decreased approximately
Gross margin increased 170 basis points compared to the prior year period, primarily resulting from lower material costs as a percentage of sales and lower technician labor costs as a percentage of sales, which were partially offset by higher distribution and occupancy costs as a percentage of sales.
Total operating expenses for the third quarter of fiscal 2024 were
Operating income for the third quarter of fiscal 2024 was
Interest expense was
Income tax expense in the third quarter of fiscal 2024 was
Net income for the third quarter of fiscal 2024 was
Monro ended the quarter with 1,296 company-operated stores and 51 franchised locations.
“Our third quarter comparable store sales decline of approximately
Broderick continued, “Despite the challenges posed by the current macro-economic environment, our business continues to be 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.”
First Nine Months Results2
For the current nine-month period:
-
Sales decreased
4.7% to$966.7 million $1,014.5 million 2.7% , compared to increases of2.3% for total company and3.3% for Retail locations in the prior year period. -
Gross margin for the nine-month period was
35.4% , compared to34.7% in the prior year period. -
Operating income was
6.3% of sales, compared to7.3% in the prior year period. -
Net income for the first nine months of fiscal 2024 was
$33.9 million $1.05 $38.6 million $1.17 -
Adjusted diluted earnings per share, a non-GAAP measure, in the first nine months of fiscal 2024 was
$1.11 $1.27
Strong Financial Position
During the first nine months of fiscal 2024, the Company generated operating cash flow of approximately
Third Quarter Fiscal 2024 Cash Dividend
On December 19, 2023, the Company paid a cash dividend for the third quarter of fiscal 2024 of
Share Repurchases
During the third quarter of fiscal 2024, the Company continued executing on its share repurchase program, which authorizes the Company to repurchase up to
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.
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, January 24, 2024 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 849052. A replay will be available approximately two hours after the recording through Wednesday, February 7, 2024 and can be accessed by dialing 1-866-813-9403 and using the required access code of 823808. 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
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,” “outlook,” “strive,” “anticipate,” “believe,” “could,” “may,” “will,” 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 and geopolitical conditions on the Company’s business, including consumer spending levels, inflation, and unemployment, seasonality, changes in the
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 equity capital structure recapitalization, transition costs related to the Company’s back-office optimization, corporate headquarters relocation costs, 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 December |
|
|
||||||||
|
2023 |
2022 |
% Change |
||||||||
|
|
|
|
||||||||
Sales |
$ |
317,653 |
|
$ |
335,193 |
|
(5.2 |
)% |
|||
|
|
|
|||||||||
Cost of sales, including distribution and occupancy costs |
|
204,976 |
|
|
221,742 |
|
(7.6 |
)% |
|||
|
|
|
|
||||||||
Gross profit |
|
112,677 |
|
|
113,451 |
|
(0.7 |
)% |
|||
|
|
|
|
||||||||
Operating, selling, general and administrative expenses |
|
91,294 |
|
|
89,605 |
|
1.9 |
% |
|||
Operating income |
|
21,383 |
|
|
23,846 |
|
(10.3 |
)% |
|||
|
|
|
|
||||||||
Interest expense, net |
|
5,043 |
|
|
5,949 |
|
(15.2 |
)% |
|||
|
|
|
|
||||||||
Other income, net |
|
(62 |
) |
|
(98 |
) |
(36.7 |
)% |
|||
|
|
|
|
||||||||
Income before income taxes |
|
16,402 |
|
|
17,995 |
|
(8.9 |
)% |
|||
|
|
|
|
||||||||
Provision for income taxes |
|
4,232 |
|
|
4,961 |
|
(14.7 |
)% |
|||
|
|
|
|
||||||||
Net income |
$ |
12,170 |
|
$ |
13,034 |
|
(6.6 |
)% |
|||
|
|
|
|||||||||
Diluted earnings per share |
$ |
0.38 |
|
$ |
0.41 |
|
(7.3 |
)% |
|||
|
|
|
|
||||||||
Weighted average number of diluted shares outstanding |
|
32,188 |
|
|
31,985 |
|
|
||||
|
|
|
|
||||||||
Number of stores open (at end of quarter) |
|
1,296 |
|
|
1,296 |
|
|
||||
MONRO, INC. Financial Highlights (Unaudited) (Dollars and share counts in thousands) |
|||||||||||
Nine Months Ended Fiscal December |
|
|
|||||||||
|
2023 |
2022 |
% Change |
||||||||
|
|
|
|
||||||||
Sales |
$ |
966,712 |
|
$ |
1,014,546 |
|
(4.7 |
)% |
|||
|
|
|
|
||||||||
Cost of sales, including distribution and occupancy costs |
|
624,666 |
|
|
662,171 |
|
(5.7 |
)% |
|||
|
|
|
|
||||||||
Gross profit |
|
342,046 |
|
|
352,375 |
|
(2.9 |
)% |
|||
|
|
|
|
||||||||
Operating, selling, general and administrative expenses |
|
280,959 |
|
|
278,802 |
|
0.8 |
% |
|||
|
|
|
|
||||||||
Operating income |
|
61,087 |
|
|
73,573 |
|
(17.0 |
)% |
|||
|
|
|
|
||||||||
Interest expense, net |
|
15,052 |
|
|
17,312 |
|
(13.1 |
)% |
|||
|
|
|
|
||||||||
Other income, net |
|
(153 |
) |
|
(275 |
) |
(44.4 |
)% |
|||
|
|
|
|
||||||||
Income before income taxes |
|
46,188 |
|
|
56,536 |
|
(18.3 |
)% |
|||
|
|
|
|
||||||||
Provision for income taxes |
|
12,317 |
|
|
17,897 |
|
(31.2 |
)% |
|||
|
|
|
|
||||||||
Net income |
$ |
33,871 |
|
$ |
38,639 |
|
(12.3 |
)% |
|||
|
|
|
|
||||||||
Diluted earnings per share |
$ |
1.05 |
|
$ |
1.17 |
|
(10.3 |
)% |
|||
|
|
|
|
||||||||
Weighted average number of diluted shares outstanding |
|
32,142 |
|
|
32,890 |
|
|
||||
|
|
|
|
||||||||
MONRO, INC. Financial Highlights (Unaudited) (Dollars in thousands) |
||||||
December 23, 2023 |
March 25, 2023 |
|||||
Assets |
||||||
|
|
|
|
|||
Cash and equivalents |
$ |
23,846 |
|
$ |
4,884 |
|
|
|
|
|
|||
Inventories |
|
160,360 |
|
|
147,397 |
|
|
|
|
|
|||
Other current assets |
|
87,488 |
|
|
106,186 |
|
|
|
|
|
|||
Total current assets |
|
271,694 |
|
|
258,467 |
|
|
|
|
|
|||
Property and equipment, net |
|
284,563 |
|
|
304,989 |
|
|
|
|
|
|||
Finance lease and financing obligation assets, net |
|
189,774 |
|
|
217,174 |
|
Operating lease assets, net |
|
205,244 |
|
|
211,101 |
|
|
|
|
|
|||
Other non-current assets |
|
781,822 |
|
|
785,146 |
|
|
|
|
|
|||
Total assets |
$ |
1,733,097 |
|
$ |
1,776,877 |
|
|
|
|
|
|||
Liabilities and Shareholders’ Equity |
|
|
|
|||
|
|
|
|
|||
Current liabilities |
$ |
486,632 |
|
$ |
449,177 |
|
|
|
|
|
|||
Long-term debt |
|
94,000 |
|
|
105,000 |
|
Long-term finance leases and financing obligations |
|
259,794 |
|
|
295,281 |
|
|
|
|
|
|||
Long-term operating lease liabilities |
|
184,777 |
|
|
191,107 |
|
|
|
|
|
|||
Other long-term liabilities |
|
48,176 |
|
|
41,390 |
|
|
|
|
|
|||
Total liabilities |
|
1,073,379 |
|
|
1,081,955 |
|
|
|
|
|
|||
Total shareholders’ equity |
|
659,718 |
|
|
694,922 |
|
|
|
|
|
|||
Total liabilities and shareholders’ equity |
$ |
1,733,097 |
|
$ |
1,776,877 |
|
MONRO, INC. Reconciliation of Adjusted Diluted Earnings Per Share (EPS) (Unaudited) |
||||||
|
||||||
Quarter Ended Fiscal |
||||||
December |
||||||
2023 |
2022 |
|||||
Diluted EPS |
$ |
0.38 |
$ |
0.41 |
||
Net loss on sale of wholesale tire and distribution assets (a) |
0.01 |
− |
||||
Store closing costs |
− |
− |
||||
Monro.Forward initiative costs |
− |
− |
||||
Litigation reserve/settlement costs |
− |
0.01 |
||||
Costs related to shareholder matters |
− |
0.01 |
||||
Transition costs related to back-office optimization |
− |
− |
||||
Corporate headquarters relocation costs |
− |
− |
||||
Adjusted Diluted EPS |
$ |
0.39 |
$ |
0.43 |
||
Supplemental Reconciliation of Adjusted Net Income (Unaudited) (Dollars in Thousands) |
||||||||
|
|
|
||||||
|
|
Quarter Ended Fiscal |
||||||
|
December |
|||||||
2023 |
2022 |
|||||||
Net Income |
$ |
12,170 |
|
$ |
13,034 |
|
||
Net loss on sale of wholesale tire and distribution assets (a) |
|
304 |
|
|
− |
|
||
Store closing costs |
|
(30 |
) |
|
6 |
|
||
Monro.Forward initiative costs |
|
− |
|
|
68 |
|
||
Litigation reserve/settlement costs |
|
− |
|
|
450 |
|
||
Costs related to shareholder matters |
|
80 |
|
|
236 |
|
||
Transition costs related to back-office optimization |
|
58 |
|
|
− |
|
||
Corporate headquarters relocation costs |
|
95 |
|
|
− |
|
||
Provision for income taxes on pre-tax adjustments (b) |
|
(131 |
) |
|
(191 |
) |
||
Adjusted Net Income |
$ |
12,546 |
|
$ |
13,603 |
|
||
MONRO, INC. Reconciliation of Adjusted Diluted Earnings Per Share (EPS) (Unaudited) |
|||||||
|
|
||||||
|
Nine Months Ended Fiscal |
||||||
|
December |
||||||
2023 |
2022 |
||||||
Diluted EPS |
$ |
1.05 |
$ |
1.17 |
|
||
Net loss/(gain) on sale of wholesale tire and distribution assets (a) |
|
0.01 |
|
(0.05 |
) |
||
Store closing costs |
|
− |
|
0.01 |
|
||
Monro.Forward initiative costs |
|
− |
|
− |
|
||
Acquisition due diligence and integration costs |
|
− |
|
− |
|
||
Litigation reserve/settlement costs |
|
− |
|
0.01 |
|
||
Management restructuring/transition costs |
|
− |
|
0.03 |
|
||
Costs related to shareholder matters |
|
0.03 |
|
0.02 |
|
||
Transition costs related to back-office optimization |
|
0.01 |
|
− |
|
||
Corporate headquarters relocation costs |
|
− |
|
− |
|
||
Certain discrete tax items (c) |
|
− |
|
0.08 |
|
||
Adjusted Diluted EPS |
$ |
1.11 |
$ |
1.27 |
|
||
Note: The calculation of the impact of non-GAAP adjustments on diluted EPS 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) |
||||||||
|
|
|||||||
|
Nine Months Ended Fiscal |
|||||||
|
December |
|||||||
2023 |
2022 |
|||||||
Net Income |
$ |
33,871 |
|
$ |
38,639 |
|
||
Net loss/(gain) on sale of wholesale tire and distribution assets (a) |
|
304 |
|
|
(1,968 |
) |
||
Store closing costs |
|
(26 |
) |
|
232 |
|
||
Monro.Forward initiative costs |
|
− |
|
|
110 |
|
||
Acquisition due diligence and integration costs |
|
5 |
|
|
(9 |
) |
||
Litigation reserve/settlement costs |
|
− |
|
|
450 |
|
||
Management restructuring/transition costs |
|
− |
|
|
1,338 |
|
||
Costs related to shareholder matters |
|
1,355 |
|
|
553 |
|
||
Transition costs related to back-office optimization |
|
699 |
|
|
- |
|
||
Corporate headquarters relocation costs |
|
155 |
|
|
- |
|
||
Provision for income taxes on pre-tax adjustments (b) |
|
(637 |
) |
|
(178 |
) |
||
Certain discrete tax items (c) |
|
− |
|
|
2,644 |
|
||
Adjusted Net Income |
$ |
35,726 |
|
$ |
41,811 |
|
||
a) |
Amount includes loss/(gain) on sale of a related warehouse, net of associated closing costs. |
|
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 |
|
| _________________________ |
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 includes the results of the divested Wholesale and tire distribution assets for fiscal 2023 through June 16. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240124223874/en/
Investors and Media: Felix Veksler
Senior Director, Investor Relations
ir@monro.com
Source: Monro, Inc.
FAQ
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What was the third quarter sales for fiscal 2024?
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What was the net income for the third quarter of fiscal 2024?
What was the sales decrease for the current nine-month period?
