~ Record Second Quarter Sales of $278.0 Million,
an Increase of 13% ~~ Second Quarter Diluted EPS of $.52, Including
$.02 of Negative Impact from Hurricane Irma and $.01 of Management
Transition Costs ~~ Completes Acquisitions of 20 Stores with
Annualized Sales of $13 Million ~~ Adjusts Fiscal 2018 Diluted EPS
Guidance to $1.95 to $2.10 ~
Monro, Inc. (Nasdaq:MNRO), a leading provider of automotive
undercar repair and tire services, today announced financial
results for its second quarter ended September 23, 2017.
Second Quarter Results
Sales for the second quarter of fiscal 2018
increased 13.0% to $278.0 million, as compared to $245.9 million
for the second quarter of fiscal 2017. The total sales increase for
the second quarter of $32.1 million was due to sales from new
stores of $34.4 million, including sales from recent acquisitions
of $29.1 million, partially offset by a comparable store sales
decrease of 0.4%. When adjusting for lost selling days as a result
of Hurricane Irma, the Company estimates comparable store sales in
the second quarter of fiscal 2018 would have been flat and sales
from new stores would have been higher by approximately $0.5
million. Comparable store sales increased approximately 6% for
brakes, 2% for front end/shocks, were flat for alignments and
decreased approximately 2% for tires and maintenance services.
Gross margin decreased 190 basis points to 38.8%
in the second quarter from 40.7% in the prior year period,
primarily due to the impact of sales mix from recent acquisitions.
On a comparable store basis, gross margin increased approximately
40 basis points compared to the prior year period. Total operating
expenses increased by $6.0 million to $74.1 million, or 26.7% of
sales, as compared to $68.1 million, or 27.7% of sales in the prior
year period. The year-over-year dollar increase represents expenses
from 39 net new stores and $0.5 million in management transition
costs.
Operating income was $33.8 million, or 12.2% of
sales, as compared to $31.9 million, or 13.0% of sales in the prior
year period. Interest expense was $6.1 million as compared to $4.5
million for the second quarter of fiscal 2017.
Net income for the second quarter of fiscal 2018
was $17.3 million, as compared to $17.5 million in the same period
of the prior year. Diluted earnings per share for the second
quarter were $.52, or $.55 when excluding the estimated net impact
from Hurricane Irma of $.02 per share and $.01 per share in
management transition costs, in line with the Company’s guidance
range of $.52 to $.56. This compares to diluted earnings per share
of $.53 in the second quarter of fiscal 2017. Net income for the
second quarter of fiscal 2018 reflects an effective tax rate of
38.2%, as compared to 36.3% in the prior year period.
During the second quarter of fiscal 2018, the
Company opened 23 and closed six Company-operated locations, ending
the quarter with 1,136 Company-operated stores and 107 franchised
locations.
“Despite a weak industry backdrop, we were able
to deliver sales and adjusted earnings results in line with our
guidance. Monro’s strong competitive positioning and solid
operating discipline drove higher product margins and operating
expense leverage, further supported by the strong performance of
our recent acquisitions,” said Brett Ponton, President and Chief
Executive Officer.
Ponton continued, “Since joining the Company in
early August, and now officially serving as Monro’s CEO, my
positive view of the Company has only strengthened and is
underscored by its current scale, cost leadership, and hardworking
team members. I’m also very optimistic about the number of
opportunities that lie ahead. I’ve begun a thorough business
assessment, and have identified a number of strategic priorities
which I believe will drive long-term organic growth. Coupled with
the continued execution of Monro’s acquisition and greenfield
strategy, I’m confident that we can build upon this strong
foundation and drive value for our shareholders.”
First Six Months Results
For the current six-month period, sales
increased 15.6% to a record $556.5 million from $481.2 million in
the same period of the prior year. Comparable store sales increased
0.5%. When adjusting for lost selling days resulting from Hurricane
Irma, comparable store sales increased approximately 0.7%. Gross
margin for the six-month period was 39.7% of sales, versus 41.2% in
the prior year period. However, on a comparable store basis, gross
margin for the first six months of fiscal 2018 was 42.4% of sales,
compared to 41.7% in the prior year period. Operating income was
12.1% of sales, compared to 13.1% in the prior year period. Net
income for the first six months of fiscal 2018 was $34.9 million,
or $1.05 per diluted share, as compared to $34.3 million, or $1.03
per diluted share in the comparable period of fiscal 2017. Diluted
earnings per share for the first six months of fiscal 2018 were
$1.10 when adjusting for the estimated net impact of Hurricane Irma
of $.02 per share and $.03 per share in management transition
costs.
Acquisitions Update
In the second quarter, the Company completed the
previously announced acquisitions of 20 stores, including eight
from an existing Car-X franchisee. These stores fill in the
existing markets of Michigan, Illinois and Indiana. The
acquisitions are expected to add approximately $13 million in
annualized sales, representing a sales mix of 95% service and 5%
tires, and are expected to be breakeven to diluted earnings per
share in fiscal 2018. Twelve of these stores will operate under the
Monro name and the remaining eight will continue to operate under
the Car-X brand.
Company Outlook
Based on current sales, business and economic
trends, and recently completed acquisitions, the Company now
anticipates fiscal 2018 sales to be in the range of $1.115 billion
to $1.145 billion, an increase of 9% to 12% as compared to fiscal
2017 sales. In light of comparable store sales trends fiscal
year-to-date, with comparable store sales down approximately 3% in
October, guidance for fiscal 2018 comparable store sales has been
revised to a range of down 1.0% to an increase of 1.0% on a 52-week
basis (an increase of 1.0% to 3.0% including an extra week in the
fourth quarter), as compared to prior guidance of an increase of
1.5% to 2.5% on a 52-week basis (3.5% to 4.5% including an extra
week in the fourth quarter).
The Company has also updated its fiscal 2018
diluted earnings per share guidance to be in the range of $1.95 to
$2.10, to reflect the revised comparable store sales guidance. This
compares to previous guidance of $2.05 to $2.20. The diluted
earnings per share guidance reflects approximately $0.05 in costs
related to the management transition, $.10 of contribution from the
53rd week, and $.15 to $.19 in accretion from recent acquisitions.
This estimate is based on 33.4 million diluted weighted average
shares outstanding. At the midpoint of the range, the revised
guidance represents a 9.5% increase in diluted earnings per share,
as compared to $1.85 in fiscal 2017.
Given the recent management transition, as well
as significant variability in monthly comparable store sales
experienced in the second half of fiscal 2017, the Company is only
providing updated fiscal 2018 full year guidance. The Company is
currently reviewing its guidance policy and will provide an update
in its fourth quarter fiscal 2018 earnings release.
Earnings Conference Call and Webcast
The Company will host a conference call and
audio webcast on Tuesday, October 24, 2017 at 11:00 a.m. Eastern
Time. The conference call may be accessed by dialing 1-800-279-9534
and using the required pass code 7988705. A replay will be
available approximately one hour after the recording through
Tuesday, November 7, 2017 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 Investor Information section of
the Company’s website, located at www.monro.com. An archive
will be available at this website through November 7, 2017.
About Monro, Inc.
Headquartered in Rochester, New York, Monro is a
chain of 1,136 Company-operated stores, 107 franchised locations,
five wholesale locations and two retread facilities providing
automotive undercar repair and tire sales and services. The Company
operates in 27 states, serving the Mid-Atlantic and New England
states 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 25,
2017. 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 FiscalSeptember |
|
|
|
|
|
2017 |
|
|
|
2016 |
|
% Change |
|
|
|
|
|
|
|
|
|
Sales |
$ |
278,017 |
|
|
$ |
245,927 |
|
13.0 |
% |
|
|
|
|
|
|
|
|
|
Cost of
sales, including distribution and occupancy costs |
|
170,076 |
|
|
|
145,930 |
|
16.5 |
% |
|
|
|
|
|
|
|
|
|
Gross
profit |
|
107,941 |
|
|
|
99,997 |
|
7.9 |
% |
|
|
|
|
|
|
|
|
|
Operating,
selling, general and administrative expenses |
|
74,120 |
|
|
|
68,072 |
|
8.9 |
% |
|
|
|
|
|
|
|
|
|
Operating
income |
|
33,821 |
|
|
|
31,925 |
|
5.9 |
% |
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
6,117 |
|
|
|
4,488 |
|
36.3 |
% |
|
|
|
|
|
|
|
|
|
Other
income, net |
|
(226 |
) |
|
|
(126 |
) |
79.6 |
% |
|
|
|
|
|
|
|
|
|
Income
before provision for income taxes |
|
27,930 |
|
|
|
27,563 |
|
1.3 |
% |
|
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
10,663 |
|
|
|
10,019 |
|
6.4 |
% |
|
|
|
|
|
|
|
|
|
Net
income |
$ |
17,267 |
|
|
$ |
17,544 |
|
(1.6 |
)% |
|
|
|
|
|
|
|
|
|
Diluted
earnings per share: |
$ |
.52 |
|
$ |
.53 |
(1.9 |
)% |
|
|
|
|
|
|
|
|
|
Weighted
average number of diluted shares outstanding |
|
33,309 |
|
|
|
33,317 |
|
|
|
|
|
|
|
|
|
|
|
Number of
stores open (at end of quarter) |
|
1,136 |
|
|
|
1,097 |
|
|
|
MONRO, INC. |
Financial Highlights |
(Unaudited) |
(Dollars and share counts in thousands) |
|
|
|
|
Six Months Ended FiscalSeptember |
|
|
|
|
|
2017 |
|
|
|
2016 |
|
% Change |
|
|
|
|
|
|
|
|
|
Sales |
$ |
556,507 |
|
|
$ |
481,217 |
|
15.6 |
% |
|
|
|
|
|
|
|
|
|
Cost of
sales, including distribution and occupancy costs |
|
335,682 |
|
|
|
283,152 |
|
18.6 |
% |
|
|
|
|
|
|
|
|
|
Gross
profit |
|
220,825 |
|
|
|
198,065 |
|
11.5 |
% |
|
|
|
|
|
|
|
|
|
Operating,
selling, general and administrative expenses |
|
153,256 |
|
|
|
134,846 |
|
13.7 |
% |
|
|
|
|
|
|
|
|
|
Operating
income |
|
67,569 |
|
|
|
63,219 |
|
6.9 |
% |
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
11,859 |
|
|
|
8,972 |
|
32.2 |
% |
|
|
|
|
|
|
|
|
|
Other
income, net |
|
(238 |
) |
|
|
(280 |
) |
(15.2 |
)% |
|
|
|
|
|
|
|
|
|
Income
before provision for income taxes |
|
55,948 |
|
|
|
54,527 |
|
2.6 |
% |
|
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
21,096 |
|
|
|
20,228 |
|
4.3 |
% |
|
|
|
|
|
|
|
|
|
Net
income |
$ |
34,852 |
|
|
$ |
34,299 |
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
Diluted
earnings per share: |
$ |
1.05 |
|
|
$ |
1.03 |
|
1.9 |
% |
|
|
|
|
|
|
|
|
|
Weighted
average number of diluted shares outstanding |
|
33,300 |
|
|
|
33,326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MONRO, INC. |
Financial Highlights |
(Unaudited) |
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 23, |
|
|
March 25, |
|
|
|
|
|
2017 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
$ |
6,368 |
|
$ |
8,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
147,106 |
|
|
|
|
142,604 |
|
|
|
|
|
|
|
|
|
|
|
Other
current assets |
|
50,601 |
|
47,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets |
|
204,075 |
|
|
199,230 |
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net |
|
404,986 |
|
|
394,634 |
|
|
|
|
|
|
|
|
|
|
|
Other
non-current assets |
|
600,177 |
|
|
591,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets |
$ |
1,209,238 |
|
$ |
1,185,264 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities |
$ |
203,329 |
|
$ |
185,893 |
|
|
|
|
|
|
|
|
|
|
|
Capital
leases and financing obligations |
|
222,890 |
|
|
213,166 |
|
|
|
|
|
|
|
|
|
|
|
Other
long-term debt |
|
153,030 |
|
|
182,337 |
|
|
|
|
|
|
|
|
|
|
|
Other
long-term liabilities |
|
22,314 |
|
|
22,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities |
|
601,563 |
|
|
604,010 |
|
|
|
|
|
|
|
|
|
|
|
Total
shareholders' equity |
|
607,675 |
|
|
581,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity |
$ |
1,209,238 |
|
$ |
1,185,264 |
|
CONTACT:
Brett PontonChief Executive Officer(585)
647-6400
Brian D’AmbrosiaSenior Vice President – FinanceChief Financial
Officer(585) 647-6400
Investors and Media: Effie VeresFTI Consulting(212) 850-5600
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