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January 28, 2014

Monro 3Q: record sales due to new stores

Monro Muffler Brake Inc. reported net income of $15.3 million on net sales of $216.7 million for its third quarter ended Dec. 28, 2013. That compares to income of $11.3 million on sales of $190.4 million for the same period last year. The company set net sales and income records for the third quarter.

With the 36.2% increase in net income and 13.8% increase in sales, the company’s income-to-sales ratio was 7.1%. Operating income for the third quarter was up 43% to $26.9 million versus $18.8 million in the prior year period.

The sales increase for the third quarter was due primarily to an increase in sales from new stores and a comparable store sales increase of 0.3%. Monro added 13 locations and closed two locations during the third quarter, ending the quarter with 951 stores.

Sales from ten stores acquired in November 2013 were approximately $15 million with an approximate sales mix of 55% tires and 45% service. Monro says these locations enable it to fill in existing markets and leverage its existing Mr. Tire and Towery's Tire brands, in these respective markets. On a combined basis, the company's acquisitions completed and announced to date in fiscal 2014 represent nearly 5% of total annual sales.

The increase in comparable store sales of 0.3% breaks down as follows:

* tire sales up 1%;

* brakes up 2%;

* maintenance services down 1%;

* alignments down 4%;

* front end/shocks down 1%; and

* exhaust down 1%.

Monro now expects its sales for the year to to be in the range of $830 million to $835 million. For the fourth quarter of fiscal 2014, the company anticipates comparable store sales to be in the range of flat to a 1% increase as month-to-date comparable store sales in January are slightly positive.

"We were able to report record sales and net income in the third quarter as we benefited from more normalized winter weather and our strong operating model,” says CEO and President John Van Heel.

“We experienced positive traffic during the quarter, with comparable store tire units up 3% for the quarter overall and up mid-single digits in November and December due to the weather trends experienced across our markets. Comparable store oil changes were also up 3% for the quarter, demonstrating that customers are continuing to service their vehicles and are performing this basic maintenance at our stores.

“With that said, we believe the economic environment continues to weigh on purchasing behavior and we continue to see our customers delay purchases and trade down from higher cost automotive maintenance and repair purchases. While we were hopeful that consumer spending would have been stronger, we were still able to deliver bottom line EPS results ahead of our expected range due to higher comparable store sales and improved operating margin through solid execution, expense management, and the ongoing outperformance of our recent acquisitions.

"Overall, we remain confident in our ability to further increase our market share and deliver strong overall sales and earnings growth, in both strong and weak markets, by leveraging our business model and pursuing our disciplined strategy.”

Van Heel says the company’s long-term outlook for the industry and company remains positive.

“As we continue actively managing our business through an environment in which consumers are allocating spending to essential needs, we are hopeful that the winter weather will accelerate sales into the spring season as customers turn to us for repairs and purchases that can no longer be delayed. We remain pleased with the performance of our acquisitions to date this fiscal year, and we continue to be encouraged by the opportunities we see for additional acquisitions in the near future.”

For details on Monro’s second-quarter results, see “Monro 2Q: more income, sales and acquisitions.”

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