~ Second Quarter Sales Increase 10.5% to a Record
$307.1 Million, Comparable Store Sales Increase 3.2% ~~ Second
Quarter Diluted EPS Increases 25.0% to a Record $.65, Including
$.02 of One-Time Costs Related to Monro.Forward Investments ~~
Expands Collaboration with Amazon.com to Provide Tire Installation
Services ~~ Signs Definitive Agreements to Acquire 18 Stores,
Bringing Annualized Sales from Fiscal 2019 Acquisitions to $80
Million ~~ Guides to Upper End of Fiscal 2019 Comparable Store
Sales Guidance and Reiterates EPS Guidance ~
Monro, Inc. (Nasdaq: MNRO), a leading provider of automotive
undercar repair and tire services, today announced financial
results for its second quarter ended September 29, 2018.
Second Quarter Results
Sales for the second quarter of the fiscal year
ending March 30, 2019 (“fiscal 2019”) increased 10.5% to $307.1
million, as compared to $278.0 million for the second quarter of
the fiscal year ended March 31, 2018 (“fiscal 2018”). The total
sales increase for the second quarter of $29.1 million was driven
by a comparable store sales increase of 3.2% and sales from new
stores of $19.9 million, including sales from recent acquisitions
of $15.6 million. Comparable store sales increased approximately
12% for brakes, 3% for tires, were flat for both maintenance
services and front end/shocks and decreased approximately 1% for
alignments.
Gross margin increased 30 basis points to 39.1%
in the second quarter of fiscal 2019 from 38.8% in the prior year
period, primarily due to leverage from higher comparable store
sales and benefits from the Company’s initiatives to optimize its
brake package pricing and its store staffing model, partially
offset by the impact of sales mix from the Free Service Tire
acquisition. Total operating expenses increased by $11.3 million to
$85.4 million, or 27.8% of sales, as compared to $74.1 million, or
26.7% of sales in the prior year period. Operating expenses
for the second quarter included $1.8 million in costs related to
the Company’s Monro.Forward initiatives, of which $1.0 million were
one-time in nature. The remaining year-over-year dollar increase
represents expenses from 42 net new stores, as well as higher
incentive based pay related to improved financial performance.
Operating income for the second quarter of
fiscal 2019 was $34.5 million, or 11.2% of sales, as compared to
$33.8 million, or 12.2% of sales in the prior year period. Interest
expense was $6.8 million for the second quarter of fiscal 2019 as
compared to $6.1 million for the second quarter of fiscal 2018.
Net income for the second quarter of fiscal 2019
was $21.8 million, as compared to $17.3 million in the same period
of the prior year. Diluted earnings per share for the second
quarter of fiscal 2019 were $.65, including $.02 of one-time costs
related to Monro.Forward investments. This compares to diluted
earnings per share of $.52 in the second quarter of fiscal 2018,
which included $.01 of management transition costs, representing a
25.0% year-over-year increase. Diluted earnings per share also
included $.01 of net impact from Hurricane Florence in the second
quarter of fiscal 2019, compared to $.02 of net impact from
Hurricane Irma in the second quarter of fiscal 2018. Net income for
the second quarter of fiscal 2019 reflected an effective tax rate
of 22.2%, as compared to 38.2% in the prior year period. The
decrease in the effective tax rate was primarily related to a
reduction in the federal income tax rate as a result of the
enactment of the Tax Cuts and Jobs Act.
During the second quarter of fiscal 2019, the
Company opened 17 company-operated locations and closed three,
ending the quarter with 1,178 company-operated stores and 97
franchised locations.
“We delivered another quarter of strong
comparable store sales growth and robust earnings per share, driven
by higher average ticket from improved in-store execution. Our
sustained momentum reflects our relentless focus on driving
operational excellence and delivering a consistent 5-star
experience to our customers. The execution of our Monro.Forward
strategic initiatives continues to progress on schedule, and we are
pleased with the key milestones we achieved during the quarter. In
addition to the launch of our data-analytics based CRM platform, we
rolled out our new websites and expanded our collaboration with
Amazon, underscoring the progress we have made in building a true
omni-channel presence,” said Brett Ponton, President and Chief
Executive Officer.
Ponton continued, “As we enter the second half
of the year, we believe the strength of our year-to-date
performance, the acceleration in our comparable store sales, up
approximately 7% month-to-date in fiscal October, and the continued
traction of our strategic initiatives position us well to achieve
the high-end of our comparable store sales guidance, assuming
normal winter weather conditions. We also believe we are well
positioned to achieve our diluted earnings per share guidance.
Given the success of our Monro.Forward strategy, we would like to
maintain flexibility to accelerate our investments in the second
half of the fiscal year and therefore are leaving our previous
diluted earnings per share guidance in place. Overall, we remain
confident that our Monro.Forward initiatives coupled with our
disciplined acquisition strategy will allow us to drive a
sustainable platform for long-term growth and strong shareholder
returns.”
First Six Months Results
For the current six-month period, sales
increased 8.3% to $602.9 million from $556.5 million in the same
period of the prior year. Comparable store sales increased 2.5%
compared to 0.5% in the prior year period. Gross margin for the
six-month period was 39.3% of sales, compared to 39.7% in the prior
year period, largely due to the impact of sales mix from the Free
Service Tire acquisition. Operating income was 11.2% of sales,
compared to 12.1% in the prior year period. Net income for the
first six months of fiscal 2019 was $42.4 million, or $1.26 per
diluted share, as compared to $34.9 million, or $1.05 per diluted
share in the comparable period of fiscal 2018.
Acquisitions Update
The Company announced today that it has signed a
definitive agreement to acquire five retail locations in Ohio,
filling in an existing market. These locations are expected to add
approximately $5 million in annualized sales, representing a sales
mix of 70% service and 30% tires. The acquisition is expected to
close in the third quarter of fiscal 2019 and to be breakeven to
diluted earnings per share in fiscal 2019.
The Company also announced today that it has
signed a definitive agreement to acquire 13 retail locations in the
Southeast, filling in an existing market. These locations are
expected to add approximately $12 million in annualized sales,
representing a sales mix of 65% service and 35% tires. The
acquisition is expected to close in the fourth quarter of fiscal
2019 and to be breakeven to diluted earnings per share in fiscal
2019.
The previously announced acquisition of seven
stores, representing $8 million in annualized sales, has been
delayed due to an extended due diligence period, and is now
expected to close in the fourth quarter of fiscal 2019.
On a combined basis, acquisitions completed and
announced to date in fiscal 2019 represent an expected total of $80
million in annualized sales.
Company Outlook
Based on current sales, business and economic
trends, and recently announced and completed acquisitions, the
Company now anticipates fiscal 2019 sales to be in the range of
$1.185 billion to $1.215 billion, an increase of 5.1% to 7.7% as
compared to fiscal 2018 sales. This compares to the previous sales
guidance range of $1.180 billion to $1.210 billion. Fiscal 2019
sales guidance continues to assume a comparable store sales
increase of 1% to 3% on a 52-week basis.
The Company reiterates its fiscal 2019 diluted
earnings per share guidance range of $2.30 to $2.40. This guidance
compares to diluted earnings per share of $1.92 in fiscal 2018. The
earnings per share guidance is based on 33.6 million diluted
weighted average shares outstanding.
Earnings Conference Call and Webcast
The Company will host a conference call and
audio webcast on Thursday, October 25, 2018 at 8:30 a.m. Eastern
Time. The conference call may be accessed by dialing 1-877-425-9470
and using the required pass-code 13683821. A replay will be
available approximately one hour after the recording through
Thursday, November 8, 2018 and can be accessed by dialing
1-844-512-2921. The live conference call and replay can also be
accessed via audio webcast at the Investors section of the
Company’s website, located at corporate.monro.com. The presentation
slides that will be reviewed during the call will be available in
the Investors section of the website shortly before the call
begins. An archive of the webcast and earnings presentation will be
available at this website through November 8, 2018.
About Monro, Inc.
Headquartered in Rochester, New York, Monro is a
chain of 1,179 Company-operated stores, 97 franchised locations,
eight wholesale locations and three retread facilities providing
automotive undercar repair and tire sales and services. The Company
operates in 28 states, serving the Mid-Atlantic and New England
regions and portions of the Great Lakes, Midwest and Southeast. The
predecessor to the Company was founded by Charles J. August in 1957
as a Midas Muffler franchise. In 1966, Monro began to diversify
into a full line of undercar repair services. The Company has
experienced significant growth in recent years through acquisitions
and, to a lesser extent, the opening of newly constructed stores.
The Company went public in 1991 and trades on Nasdaq under the
symbol MNRO.
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 “expected,” “estimate,” “guidance,” “outlook,”
“anticipate,” “project,” “believe,” “could,” “may,” “intend,”
“plan” 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, the effect of economic conditions,
seasonality, 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 31,
2018. 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.
MONRO, INC. Financial Highlights
(Unaudited) (Dollars and share counts in thousands) |
|
|
Quarter Ended Fiscal September |
|
|
|
2018 |
|
|
2017 |
% Change |
|
|
|
|
|
|
|
|
|
|
Sales |
$ |
307,105 |
|
$ |
278,017 |
|
|
|
10.5% |
|
|
|
|
|
|
|
|
|
|
Cost of sales,
including distribution and occupancy costs |
|
187,157 |
|
|
170,076 |
|
|
|
10.0% |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
119,948 |
|
|
107,941 |
|
|
|
11.1% |
|
|
|
|
|
|
|
|
|
|
Operating, selling,
general and administrative expenses |
|
85,440 |
|
|
74,120 |
|
|
|
15.3% |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
34,508 |
|
|
33,821 |
|
|
|
2.0% |
|
|
|
|
|
|
|
|
|
|
Interest expense,
net |
|
6,803 |
|
|
6,117 |
|
|
|
11.2% |
|
|
|
|
|
|
|
|
|
|
Other income, net |
|
(261) |
|
|
(226) |
|
|
|
15.4% |
|
|
|
|
|
|
|
|
|
|
Income before provision
for income taxes |
|
27,966 |
|
|
27,930 |
|
|
|
0.1% |
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
6,205 |
|
|
10,663 |
|
|
|
(41.8)% |
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
21,761 |
|
$ |
17,267 |
|
|
|
26.0% |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share |
$ |
.65 |
|
$ |
.52 |
|
|
|
25.0% |
|
|
|
|
|
|
|
|
|
|
Weighted average number
of diluted shares outstanding |
|
33,640 |
|
|
33,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of stores open
(at end of quarter) |
|
1,178 |
|
|
1,136 |
|
|
|
|
|
|
|
|
|
MONRO,
INC.Financial Highlights(Unaudited)(Dollars and share
counts in thousands) |
|
|
|
|
|
|
Six Months Ended Fiscal
September |
|
|
|
|
|
2018 |
|
|
|
2017 |
|
% Change |
|
|
|
|
|
|
|
|
|
Sales |
$ |
602,916 |
|
|
$ |
556,507 |
|
8.3 |
% |
|
|
|
|
|
|
|
|
|
Cost of sales, including distribution and
occupancy costs |
|
365,731 |
|
|
|
335,682 |
|
9.0 |
% |
|
|
|
|
|
|
|
|
|
Gross profit |
|
237,185 |
|
|
|
220,825 |
|
7.4 |
% |
|
|
|
|
|
|
|
|
|
Operating, selling, general and administrative
expenses |
|
169,605 |
|
|
|
153,256 |
|
10.7 |
% |
|
|
|
|
|
|
|
|
|
Operating income |
|
67,580 |
|
|
|
67,569 |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
13,383 |
|
|
|
11,859 |
|
12.9 |
% |
|
|
|
|
|
|
|
|
|
Other income, net |
|
(488 |
) |
|
|
(238 |
) |
105.6 |
% |
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
54,685 |
|
|
|
55,948 |
|
(2.3 |
)% |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
12,280 |
|
|
|
21,096 |
|
(41.8 |
)% |
|
|
|
|
|
|
|
|
|
Net income |
$ |
42,405 |
|
|
$ |
34,852 |
|
21.7 |
% |
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
$ |
1.26 |
|
|
$ |
1.05 |
|
20.0 |
% |
|
|
|
|
|
|
|
|
|
Weighted average number of diluted shares
outstanding |
|
33,546 |
|
|
|
33,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MONRO,
INC.Financial Highlights(Unaudited)(Dollars in
thousands) |
|
|
|
|
|
|
September 29, |
|
|
March 31, |
|
|
|
|
|
|
2018 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
2,173 |
|
$ |
1,909 |
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
156,762 |
|
|
152,367 |
|
|
|
|
|
|
|
|
|
Other current assets |
|
63,106 |
|
|
52,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
222,041 |
|
|
207,256 |
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
425,641 |
|
|
416,669 |
|
|
|
|
|
|
|
|
|
|
|
Other non-current assets |
|
615,583 |
|
|
594,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
1,263,265 |
|
$ |
1,218,432 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders'
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
$ |
199,878 |
|
$ |
194,005 |
|
|
|
|
|
|
|
|
|
|
|
Capital leases and financing obligations |
|
228,828 |
|
|
227,220 |
|
|
|
|
|
|
|
|
|
|
|
Other long-term debt |
|
151,352 |
|
|
148,068 |
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
19,866 |
|
|
20,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
599,924 |
|
|
589,956 |
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity |
|
663,341 |
|
|
628,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
$ |
1,263,265 |
|
$ |
1,218,432 |
|
CONTACT:
Kim RuddExecutive Assistant(585) 784-3324
Investors and Media: Melanie DambreFTI
Consulting(212) 850-5600
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