~ Third Quarter Sales Increase 8.5% to a Record
$310.1 Million ~~ Delivers Fourth Consecutive Quarter of Comparable
Store Sales Growth ~~ Record Third Quarter Diluted EPS of $.61, an
Increase of 74.3% ~~ Completes Acquisitions of 18 Stores and Signs
Definitive Agreement to Acquire 12 Stores, BringingTotal Fiscal
2019 Year-to-Date Annualized Sales from Acquisitions to $87 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 third quarter ended December 29, 2018.
Third Quarter Results
Sales for the third quarter of the fiscal year
ending March 30, 2019 (“fiscal 2019”) increased 8.5% to $310.1
million, as compared to $285.7 million for the third quarter of the
fiscal year ended March 31, 2018 (“fiscal 2018”). The total sales
increase for the third quarter of $24.4 million was driven by sales
from new stores of $19.8 million, including sales from recent
acquisitions of $14.3 million, and a comparable store sales
increase of 2.2% on a reported basis. When adjusted for one less
selling day in the current year quarter due to a shift in the
timing of the Christmas holiday from the fourth quarter in fiscal
2018 to the third quarter in fiscal 2019, comparable store sales
increased 3.3%. Comparable store sales, adjusted for days,
increased approximately 12% for brakes, 3% for tires, 1% for
alignments, were flat for maintenance services and decreased
approximately 4% for front end/shocks.
Gross margin increased 60 basis points to 38.0%
in the third quarter of fiscal 2019 from 37.4% in the prior year
period, primarily due to benefits from the Company’s initiatives to
optimize its product and service offerings with the introduction of
Good-Better-Best service packages earlier this year, optimization
of its store staffing model and from leverage from higher
comparable store sales, partially offset by the impact of sales mix
from the Free Service Tire acquisition. Total operating expenses
increased by $9.6 million to $87.3 million, or 28.1% of sales, as
compared to $77.7 million, or 27.2% of sales in the prior year
period. Operating expenses for the third quarter included $1.5
million in costs related to the Company’s Monro.Forward
initiatives, of which $.4 million were one-time in nature, as well
as $.4 million of corporate and field management realignment costs.
Operating expenses for the third quarter of the prior year period
included $2.0 million in litigation settlement costs and $.7
million in management transition costs. The remaining
year-over-year dollar increase represents expenses from 48 net new
stores, as well as higher incentive pay related to improved
financial performance.
Operating income for the third quarter of fiscal
2019 was $30.7 million, or 9.9% of sales, as compared to $29.3
million, or 10.3% of sales in the prior year period. Adjusting for
the impact of the Christmas holiday shift, operating income for the
third quarter of fiscal 2019 was 10.3% of sales. Interest expense
was $6.8 million for the third quarter of fiscal 2019 as compared
to $6.1 million for the third quarter of fiscal 2018.
Net income for the third quarter of fiscal 2019
was $20.5 million, as compared to $11.6 million in the same period
of the prior year. Diluted earnings per share for the third quarter
of fiscal 2019 were $.61, including $.01 of one-time costs related
to Monro.Forward investments, $.01 of corporate and field
management realignment costs, $.04 negative impact from the
Christmas holiday shift and $.06 benefit from a one-time income tax
adjustment. This compares to diluted earnings per share of $.35 in
the third quarter of fiscal 2018, which included $.15 of one-time
costs, representing a 74.3% year-over-year increase. The one-time
costs incurred in the third quarter of fiscal 2018 consisted of
$.01 per share in management transition costs, $.04 per share in
litigation settlement costs and $.10 per share related to the net
impact of newly enacted tax legislation. Net income for the third
quarter of fiscal 2019 reflected an effective tax rate of 15.3%, as
compared to 50.1% 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, the one-time income tax benefit adjustment in
the third quarter of fiscal 2019 and the one-time income tax
expense adjustment in the prior year period.
During the third quarter of fiscal 2019, the
Company opened nine company-operated locations and closed one,
ending the quarter with 1,186 company-operated stores, 99
franchised locations, eight wholesale locations and three retread
facilities.
“We delivered our fourth consecutive quarter of
positive comparable store sales growth and achieved a third quarter
record earnings per share, reflecting sustained demand in our tire
and brake categories and solid execution across our business. Our
Monro.Forward initiatives continue to gain traction, and I am
pleased to report that we successfully implemented our standardized
in-store operating procedures and store refresh program at our 31
pilot locations in Rochester, NY. We are encouraged by the
outperformance of these stores and look forward to expanding this
initiative across our store base. Additionally, we continue to
capitalize on accretive acquisitions and plan to enter a new state
in the fourth quarter with a 12 store acquisition in Louisiana,
further expanding and diversifying our geographical footprint,”
said Brett Ponton, President and Chief Executive Officer.
Ponton continued, “Following strong top-line
performance in October and November supported by early winter
weather conditions, mild weather in December and early January
negatively impacted our top-line. We are encouraged by a recovery
in late January that has lifted fourth quarter to date comparable
store sales up approximately 2% on a reported basis. We remain
confident in our ability to achieve the upper-end of our full year
comparable store sales guidance range. Looking ahead, we intend to
maintain our steadfast commitment to driving operational excellence
and delivering a consistent 5-star experience to our customers,
while executing our disciplined acquisition strategy to achieve a
scalable platform for sustainable, long-term value for our
shareholders.”
First Nine Months Results
For the nine-month period ended December 29,
2018, sales increased 8.4% to a record $913.0 million from $842.2
million in the same period of the prior year. Comparable store
sales increased 2.4% on a reported basis, and 2.8% when adjusted
for one less selling day due to the Christmas holiday shift,
compared to a decrease of .7% in the prior year period. Gross
margin for the nine-month period was 38.9% of sales and remained
flat compared to the prior year period. Operating margin was 10.8%
of sales for the nine-month period, compared to 11.5% in the prior
year period. Net income for the first nine months of fiscal 2019
was $62.9 million, or $1.87 per diluted share, as compared to $46.5
million, or $1.39 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 12 retail locations in Louisiana, a
new state for Monro, further expanding the Company’s geographic
footprint into southern markets. These locations are expected to
add approximately $15 million in annualized sales, representing a
sales mix of 35% service and 65% 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.
In the third quarter, the Company also completed
the previously announced acquisition of five retail locations
in Ohio. These locations are expected to add approximately $5
million in annualized sales, representing a sales mix of 70%
service and 30% tires. Early in the fourth quarter, the Company
completed the previously announced acquisition of 13 retail
locations in Florida. These locations are expected to add
approximately $12 million in annualized sales, representing a sales
mix of 65% service and 35% tires. These acquisitions fill in
existing markets and are expected to be breakeven to diluted
earnings per share in fiscal 2019.
A previously announced acquisition of seven
stores, representing $8 million in annualized sales, is not
expected to close as the Company has decided to not pursue the
acquisition following an extended due diligence period.
On a combined basis, acquisitions completed and
announced to date in fiscal 2019 represent an expected total of $87
million in annualized sales.
Company Outlook
Based on current sales, business and economic
trends, and recently announced and completed acquisitions, the
Company continues to expect 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. 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
diluted 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, January 31, 2019 at 8:30 a.m. Eastern
Time. The conference call may be accessed by dialing 1-877-425-9470
and using the required passcode 13686705. A replay will be
available approximately two hours after the recording through
Thursday, February 14, 2019 and can be accessed by dialing
1-844-512-2921 and using the required pass code of 13686705. 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. An archive will be available at this
website through February 14, 2019.
About Monro, Inc.
Headquartered in Rochester, New York, Monro is a
chain of 1,197 Company-operated stores, 99 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 The Nasdaq Stock
Market 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,” “assume,” “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 FiscalDecember |
|
|
|
2018 |
|
2017 |
% Change |
|
|
|
|
|
|
|
|
|
Sales |
$ |
310,110 |
|
|
$ |
285,730 |
|
8.5 |
% |
|
|
|
|
|
|
|
Cost of
sales, including distribution and occupancy costs |
|
192,144 |
|
|
|
178,743 |
|
7.5 |
% |
|
|
|
|
|
|
|
Gross
profit |
|
117,966 |
|
|
|
106,987 |
|
10.3 |
% |
|
|
|
|
|
|
|
Operating,
selling, general and administrative expenses |
|
87,256 |
|
|
|
77,688 |
|
12.3 |
% |
|
|
|
|
|
|
|
Operating
income |
|
30,710 |
|
|
|
29,299 |
|
4.8 |
% |
|
|
|
|
|
|
|
Interest
expense, net |
|
6,797 |
|
|
|
6,138 |
|
10.7 |
% |
|
|
|
|
|
|
|
Other
income, net |
|
(321 |
) |
|
|
(99 |
) |
223.4 |
% |
|
|
|
|
|
|
|
Income
before provision for income taxes |
|
24,234 |
|
|
|
23,260 |
|
4.2 |
% |
|
|
|
|
|
|
|
Provision
for income taxes |
|
3,703 |
|
|
|
11,659 |
|
(68.2 |
)% |
|
|
|
|
|
|
|
Net
income |
$ |
20,531 |
|
|
$ |
11,601 |
|
77.0 |
% |
|
|
|
|
|
|
|
Diluted
earnings per share: |
$ |
.61 |
|
|
$ |
.35 |
|
74.3 |
% |
|
|
|
|
|
|
|
|
Weighted
average number of diluted shares outstanding |
|
33,766 |
|
|
|
33,352 |
|
|
|
|
|
|
|
|
|
|
|
Number of
stores open (at end of quarter) |
|
1,186 |
|
|
|
1,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
MONRO, INC.Financial
Highlights(Unaudited)(Dollars and share counts in thousands)
|
Nine Months Ended FiscalDecember |
|
|
|
2018 |
|
2017 |
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
$ |
913,027 |
|
|
$ |
842,237 |
|
|
8.4 |
% |
|
|
|
|
|
|
|
|
Cost of
sales, including distribution and occupancy costs |
|
557,876 |
|
|
|
514,426 |
|
|
8.4 |
% |
|
|
|
|
|
|
|
|
Gross
profit |
|
355,151 |
|
|
|
327,811 |
|
|
8.3 |
% |
|
|
|
|
|
|
|
|
Operating,
selling, general and administrative expenses |
|
256,862 |
|
|
|
230,943 |
|
|
11.2 |
% |
|
|
|
|
|
|
|
|
Operating
income |
|
98,289 |
|
|
|
96,868 |
|
|
1.5 |
% |
|
|
|
|
|
|
|
|
Interest
expense, net |
|
20,180 |
|
|
|
17,997 |
|
|
12.1 |
% |
|
|
|
|
|
|
|
|
Other
income, net |
|
(809 |
) |
|
|
(336 |
) |
|
140.3 |
% |
|
|
|
|
|
|
|
|
Income
before provision for income taxes |
|
78,918 |
|
|
|
79,207 |
|
|
(0.4 |
)% |
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
15,982 |
|
|
|
32,755 |
|
|
(51.2 |
)% |
|
|
|
|
|
|
|
|
Net
income |
$ |
62,936 |
|
|
$ |
46,452 |
|
|
35.5 |
% |
|
|
|
|
|
|
|
|
Diluted
earnings per share |
$ |
1.87 |
|
|
$ |
1.39 |
|
|
34.5 |
% |
|
|
|
|
|
|
|
|
Weighted
average number of diluted shares outstanding |
|
33,605 |
|
|
|
33,317 |
|
|
|
|
|
|
|
|
|
|
|
MONRO, INC.Financial
Highlights(Unaudited)(Dollars in thousands)
|
|
|
|
|
|
December
29, |
|
March 31, |
|
2018 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
$ |
3,579 |
|
$ |
1,909 |
|
|
|
|
|
|
|
|
|
|
Inventories |
|
158,846 |
|
|
152,367 |
|
|
|
|
|
|
|
|
|
|
Other
current assets |
|
59,888 |
|
|
52,980 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current
assets |
|
222,313 |
|
|
207,256 |
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net |
|
430,643 |
|
|
416,669 |
|
|
|
|
|
|
|
|
|
Other
non-current assets |
|
614,125 |
|
|
594,507 |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
1,267,081 |
|
$ |
1,218,432 |
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities |
$ |
212,623 |
|
$ |
194,005 |
|
|
|
|
|
|
|
|
|
Capital
leases and financing obligations |
|
228,877 |
|
|
227,220 |
|
|
|
|
|
|
|
|
|
Other
long-term debt |
|
119,884 |
|
|
148,068 |
|
|
|
|
|
|
|
|
|
Other
long-term liabilities |
|
19,563 |
|
|
20,663 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
580,947 |
|
|
589,956 |
|
|
|
|
|
|
|
|
|
Total
shareholders' equity |
|
686,134 |
|
|
628,476 |
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders' equity |
$ |
1,267,081 |
|
$ |
1,218,432 |
|
|
|
|
|
|
CONTACT:Kim RuddExecutive Assistant(585) 784-3324
Investors and Media: Melanie DambreFTI Consulting(212)
850-5600
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