- Second Quarter Sales Decreased 5.1% to $329.8 Million, due to
the Divestiture of Wholesale Tire and Distribution Assets in First
Quarter Fiscal 2023
- Second Quarter Comparable Store Sales Increased 1.3%, driven by
an ~10% Comparable Store Sales Increase in ~300 Small or
Underperforming Stores
- Second Quarter Diluted EPS of $.40; Adjusted Diluted EPS1 of
$.43
- Generated Cash from Operating Activities of ~$120M for the
First Half of Fiscal 2023
- Repurchased ~1.2M Shares of Common Stock; Cumulative Share
Repurchases of ~1.6M Shares of Common Stock through Second Quarter
at an Average Price of ~$44.00 per share
Monro, Inc. (Nasdaq: MNRO), a leading provider of automotive
undercar repair and tire services, today announced financial
results for its second quarter ended September 24, 2022.
Second Quarter Results2
Sales for the second quarter of the fiscal year ending March 25,
2023 (“fiscal 2023”) decreased 5.1% to $329.8 million, as compared
to $347.7 million for the second quarter of the fiscal year ended
March 26, 2022 (“fiscal 2022”). The total sales decline of $17.9
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 $28.8 million in the second quarter
of fiscal 2022. Comparable store sales increased 1.3% for the
period, driven by an approximate 10% 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 14.8% in the prior year period. Sales from new
stores increased $8.1 million, primarily from recent
acquisitions.
Comparable store sales increased approximately 6% for tires and
1% for maintenance services compared to the prior year period.
Comparable store sales decreased approximately 5% for brakes and
front end/shocks and 8% for alignments compared to the prior year
period. Please refer to the “Comparable Store Sales” section below
for a discussion of how the Company defines comparable store
sales.
Gross margin decreased 220 basis points to 35.4% in the second
quarter of fiscal 2023 from 37.6% in the prior year period. The
decrease was primarily due to a higher mix of tire sales in the
Company’s retail locations, customer trade down to opening price
point tires, as well as parts inflation that the Company
intentionally did not fully pass through to consumers, which
resulted in an increase in material costs as a percentage of sales
from the prior year. Additionally, incremental investments in
technician labor and wages to support current and future topline
growth increased labor costs 100 basis points from the prior year.
These increases more than offset the benefits to gross margin from
the divestiture of the Company’s Wholesale tire and distribution
assets.
Total operating expenses for the second quarter of fiscal 2023
were $93.3 million, or 28.3% of sales, as compared to $96.2
million, or 27.7% of sales in the prior year period. The increase
as a percentage of sales was principally due to the divestiture of
the Company’s Wholesale tire and distribution assets. This was
partially offset by cost control in the second quarter of fiscal
2023.
Operating income for the second quarter of fiscal 2023 was $23.5
million, or 7.1% of sales, as compared to $34.5 million, or 9.9% of
sales in the prior year period. Interest expense was $5.7 million
for the second quarter of fiscal 2023, as compared to $6.3 million
for the second quarter of fiscal 2022, principally due to a
decrease in weighted average debt.
Income tax expense in the second quarter of fiscal 2023 was $4.7
million, or an effective tax rate of 26.6%, compared to $7.3
million, or an effective tax rate of 25.7% in the prior year
period.
Net income for the second quarter of fiscal 2023 was $13.1
million, as compared to $21.0 million in the same period of the
prior year. Diluted earnings per share for the second quarter of
fiscal 2023 was $.40, compared to $.62 in the second quarter of
fiscal 2022. Adjusted diluted earnings per share, a non-GAAP
measure, for the second quarter of fiscal 2023 was $.43, with a
majority of the $.03 per share of excluded costs coming from
restructuring and elimination of certain executive management
positions upon the completed divestiture of the Company’s Wholesale
locations and tire distribution assets. Please refer to the
reconciliation of adjusted diluted earnings per share in the table
below for further details regarding this and any other excluded
costs in the second quarter of fiscal 2023. Please refer to the
“Non-GAAP Financial Measures” section below for a discussion of
this non-GAAP measure.
During the second quarter of fiscal 2023, the Company closed 6
stores. Monro ended the quarter with 1,297 company-operated stores
and 80 franchised locations.
“While our topline results do not fully reflect the good work of
all of our teammates, we continued to make progress on our overall
strategy in the second quarter. Led by approximately 10% growth in
our small or underperforming stores, comparable store sales
increased approximately 1%, with momentum building as the quarter
progressed. Given the challenges of the current macro environment,
we saw stretched consumers trade down to lower priced tire options
and defer vehicle maintenance in some of our key service
categories. Our partnership with American Tire Distributors allowed
us to reposition our tire assortment to give our customers the
right tire at the right price. In an effort to build a longer-term
relationship with our customers, we made an intentional decision to
not fully offset parts inflation through additional increases in
price. We also maintained the critical investments we’ve made in
our labor force in order to preserve our long-term service model.
Although our investments in price and labor impacted our gross
margin, we gained market share in our tire category in the second
quarter. Supported by strong performance in our tire category as
well as improving trends in our service categories, we are seeing
positive signs that the consumer deferral cycle might be coming to
an end. The strengthening sequential demand that we saw in the
second quarter has continued into fiscal October, with our
preliminary comparable store sales up 3.7%”, said Mike Broderick,
President and Chief Executive Officer.
Broderick continued, “We remain confident that as long as our
stores are properly staffed, our pricing is competitive with the
right assortment and we continue to improve our in-store execution,
we will be able to drive traffic to our stores to serve the needs
of our customers and capture market share gains. While we still
have significant opportunities and important work to do to achieve
the kind of operational excellence that will allow us to
consistently deliver on our mid-single digit comp store sales
expectations, we believe our business is well-positioned with the
right strategy in place to take advantage of longer-term industry
tailwinds.”
First Six Months Results3
For the current six-month period:
- Sales decreased 1.5% to $679.4 million from $689.5 million in
the same period of the prior year. Comparable store sales increased
0.8%, compared to an increase of 23.8% in the prior year period.
Comparable store sales at Retail locations increased 2.0%, compared
to an increase of 25.5% in the prior year period.
- Gross margin for the six-month period was 35.2%, compared to
37.2% in the prior year period.
- Operating income was 7.3% of sales, compared to 9.0% in the
prior year period.
- Net income for the first six months of fiscal 2023 was $25.6
million, or $.77 per diluted share, as compared to $36.7 million,
or $1.08 per diluted share in the prior year period.
- Adjusted diluted earnings per share, a non-GAAP measure, in the
first six months of fiscal 2023 was $.85. This compares to adjusted
diluted earnings per share of $1.17 in the first six months of
fiscal 2022. Please refer to the reconciliation of adjusted diluted
earnings per share in the table below for details regarding
excluded costs in the first six months of fiscal 2023 and 2022.
Please refer to the “Non-GAAP Financial Measures” section below for
a discussion of this non-GAAP measure.
Strong Financial
Position
During the first half of fiscal 2023, the Company generated
strong operating cash flow of approximately $120 million. As of
September 24, 2022, the Company had cash and cash equivalents of
approximately $10 million and availability on its revolving credit
facility of approximately $440 million.
Second Quarter Fiscal 2023 Cash
Dividend
On September 6, 2022, the Company paid a cash dividend for the
second quarter of fiscal year 2023 of $.28 per share.
Share Repurchases
During the second quarter of fiscal 2023, the Company continued
executing on its share repurchase program, which authorizes the
Company to repurchase up to $150 million of its common stock. The
Company repurchased approximately 1.2 million shares of its common
stock during the second quarter of fiscal 2023. In total, the
Company has repurchased approximately 1.6 million shares at an
average price of $44.00 for approximately $71 million through the
second quarter of fiscal 2023.
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.
Company Outlook
Monro is not providing fiscal 2023 financial guidance at this
time but will provide perspective on its outlook for fiscal 2023
during its earnings conference call.
Earnings Conference Call and
Webcast
The Company will host a conference call and audio webcast on
Wednesday, October 26, 2022 at 8:30 a.m. Eastern Time. The
conference call may be accessed by dialing 1-833-927-1758 and using
the required access code of 740974. A replay will be available
approximately two hours after the recording through Wednesday,
November 9, 2022 and can be accessed by dialing 1-866-813-9403 and
using the required access code of 211970. 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 $1.4 billion in sales in fiscal
2022 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 www.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,”
“anticipate,” “believe,” “could,” “may,” “might,” “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, the effect of general business or economic conditions
on the Company’s business, including the direct and indirect
effects of the COVID-19 pandemic and the Russian invasion of
Ukraine on the economy, 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 26, 2022. 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 and items related to store
closings as well as our Monro.Forward or 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.
__________________________ 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. 3 Financial performance
includes the results of the divested Wholesale and tire
distribution assets for the first six months of fiscal 2022 and
fiscal 2023 through June 16.
Source: Monro, Inc. MNRO-Fin
MONRO, INC.
Financial Highlights
(Unaudited)
(Dollars and share counts in
thousands)
Quarter
Ended Fiscal September
2022
2021
%
Change
Sales
$
329,818
$
347,699
(5.1
%)
Cost of sales, including distribution and
occupancy costs
213,083
217,016
(1.8
%)
Gross profit
116,735
130,683
(10.7
%)
Operating, selling, general and
administrative expenses
93,262
96,205
(3.1
%)
Operating income
23,473
34,478
(31.9
%)
Interest expense, net
5,705
6,276
(9.1
%)
Other income, net
(98
)
(50
)
96.0
%
Income before provision for income
taxes
17,866
28,252
(36.8
%)
Provision for income taxes
4,745
7,267
(34.7
%)
Net income
$
13,121
$
20,985
(37.5
%)
Diluted earnings per share
$
0.40
$
0.62
(35.5
%)
Weighted average number of diluted shares
outstanding
32,729
34,027
Number of stores open (at end of
quarter)
1,297
1,288
MONRO, INC.
Financial Highlights
(Unaudited)
(Dollars and share counts in
thousands)
Six
Months Ended Fiscal September
2022
2021
%
Change
Sales
$
679,353
$
689,517
(1.5
%)
Cost of sales, including distribution and
occupancy costs
440,429
432,903
1.7
%
Gross profit
238,924
256,614
(6.9
%)
Operating, selling, general and
administrative expenses
189,197
194,219
(2.6
%)
Operating income
49,727
62,395
(20.3
%)
Interest expense, net
11,364
13,217
(14.0
%)
Other income, net
(178
)
(93
)
91.4
%
Income before provision for income
taxes
38,541
49,271
(21.8
%)
Provision for income taxes
12,936
12,605
2.6
%
Net income
$
25,605
$
36,666
(30.2
%)
Diluted earnings per share
$
0.77
$
1.08
(28.7
%)
Weighted average number of diluted shares
outstanding
33,349
34,026
MONRO, INC.
Financial Highlights
(Unaudited)
(Dollars in thousands)
September 24,
March 26,
2022
2022
Assets
Cash and equivalents
$
9,794
$
7,948
Inventories
135,006
166,271
Other current assets
96,011
71,283
Total current assets
240,811
245,502
Property and equipment, net
307,585
315,193
Finance lease and financing obligation
assets, net
236,734
268,406
Operating lease assets, net
213,715
213,588
Other non-current assets
790,224
828,723
Total assets
$
1,789,069
$
1,871,412
Liabilities and Shareholders'
Equity
Current liabilities
$
385,161
$
321,964
Long-term debt
130,000
176,466
Long-term finance leases and financing
obligations
320,102
357,475
Long-term operating lease liabilities
193,660
192,637
Other long-term liabilities
38,376
39,964
Total liabilities
1,067,299
1,088,506
Total shareholders' equity
721,770
782,906
Total liabilities and shareholders'
equity
$
1,789,069
$
1,871,412
MONRO, INC.
Reconciliation of Adjusted
Diluted Earnings Per Share (EPS)
(Unaudited)
Quarter Ended Fiscal
September
2022
2021
Diluted EPS
$
0.40
$
0.62
Gain on sale of wholesale tire and
distribution assets, net (a)
(0.02
)
-
Store closing costs
0.01
-
Monro.Forward initiative costs
-
-
Acquisition due diligence and integration
costs
-
-
Management restructuring/transition costs
(b)
0.03
-
Costs related to shareholder matters
0.01
-
Adjusted Diluted EPS
$
0.43
$
0.62
Supplemental Reconciliation of
Adjusted Net Income
(Unaudited)
(Dollars in Thousands)
Quarter Ended Fiscal
September
2022
2021
Net Income
$
13,121
$
20,985
Gain on sale of wholesale tire and
distribution assets, net (a)
(788
)
-
Store closing costs
230
(158
)
Monro.Forward initiative costs
19
48
Acquisition due diligence and integration
costs
1
110
Management restructuring/transition costs
(b)
1,338
-
Costs related to shareholder matters
317
-
Provision for income taxes on pre-tax
adjustments (c)
(280
)
-
Adjusted Net Income
$
13,958
$
20,985
MONRO, INC.
Reconciliation of Adjusted
Diluted Earnings Per Share (EPS)
(Unaudited)
Six Months Ended
Fiscal
September
2022
2021
Diluted EPS
$
0.77
$
1.08
Gain on sale of wholesale tire and
distribution assets, net (a)
(0.05
)
-
Store closing costs
0.01
(0.01
)
Monro.Forward initiative costs
-
-
Acquisition due diligence and integration
costs
-
0.01
Management restructuring/transition costs
(b)
0.03
-
Litigation settlement costs
-
0.09
Costs related to shareholder matters
0.01
-
Certain discrete tax items (d)
0.08
-
Adjusted Diluted EPS
$
0.85
$
1.17
Supplemental Reconciliation of
Adjusted Net Income
(Unaudited)
(Dollars in Thousands)
Six Months Ended
Fiscal
September
2022
2021
Net Income
$
25,605
$
36,666
Gain on sale of wholesale tire and
distribution assets, net (a)
(1,968
)
-
Store closing costs
226
(430
)
Monro.Forward initiative costs
42
151
Acquisition due diligence and integration
costs
(9
)
420
Management restructuring/transition costs
(b)
1,338
59
Litigation settlement costs
-
3,920
Costs related to shareholder matters
317
-
Provision for income taxes on pre-tax
adjustments (c)
13
(997
)
Certain discrete tax items (d)
2,644
-
Adjusted Net Income
$
28,208
$
39,789
- Amount includes gain on sale of wholesale tire locations and
tire distribution assets, net of closing costs and costs associated
with the closing of a related warehouse.
- Costs incurred in fiscal 2023 in connection with restructuring
and elimination of certain executive management positions upon
completion of the Company’s sale of wholesale tire locations and
tire distribution assets.
- 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.
- Amount relates to the sale of wholesale tire locations and tire
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221026005279/en/
Investors and Media: Felix Veksler Senior Director, Investor
Relations ir@monro.com
Monro (NASDAQ:MNRO)
Historical Stock Chart
From Aug 2024 to Sep 2024
Monro (NASDAQ:MNRO)
Historical Stock Chart
From Sep 2023 to Sep 2024