Tire sales, as well as maintenance services, alignments, brakes, front end/shocks, and exhaust jobs were all down at Monro Muffler Brake Inc.'s comparable stores during the first quarter of fiscal 2017, ended June 25, 2016.
Monro recorded net sales of $236.9 million, up .2% from 236.5 million for the same period a year ago. And the company says the increase is largely from its acquisitions, including sales of $18.5 million from new stores — $16.8 million which is attributed to sales of recently acquired stores. Overall comparable store sales were down 6.9%.
Net income for the quarter was almost $16.7 million, down from around $18.8 million in 2015. That's a drop of nearly 10.9%. Monro's income-to-sales ratio was 7% for the period.
Here's a breakdown of the company's comparable store sales data for the quarter:
Maintenance services -6%
Front end/shocks -15%
New stores and acquisitions
Monro opened 36 company-operated locations and closed one during the first quarter, and ended the quarter with 1,064 company-operated stores and 133 franchised Car-X stores. The new stores include the acquisition of 29 McGee Auto Service and Tires retail and commercial stores as well as seven new greenfield locations.
The company announced in May it was using the McGee acquisition as a springboard into the commercial tire market, as well as a bigger step into the Florida market. In May Monro said it was operating 83 stores in the state. It now claims 86 stores "extending across both Florida coasts, representing approximately $118 million in annualized sales. Monro believes that the state represents a significant opportunity for continued store growth and further diversification of the company`s footprint into southern markets."
In addition, the company said it has signed definitive agreements to acquire stores located within its markets. Those stores are expected to add approximately $40 million in annualized sales. The acquisitions are expected to close in the second quarter and to be breakeven to slightly dilutive in fiscal 2017. (The company has been hinting at pending acquisitions for the past year.)
From the CEO
John Van Heel, CEO and president said, “Our top-line results for the first quarter continued to reflect both a difficult consumer spending environment and the lingering effects of a mild winter on our business across our Northern markets. However, our focus on margins and cost control, combined with the successful integration of our acquisitions, allowed us to deliver earnings at the higher end of our guidance. Additionally, we opened a net 35 new stores through acquisition and greenfield growth during the quarter and announced the signing of definitive agreements to acquire additional stores with approximately $40 million in annualized sales. The added scale and purchasing power from these new stores, which represent approximately 10% annualized sales growth, is expected to support earnings growth for many years to come.”
Based on current visibility, business and economic trends, and recently completed and announced acquisitions, the company now anticipates fiscal 2017 sales to be in the range of $1 billion to $1.03 billion versus the previous guidance range of $980 million to $1.01 billion. The fiscal 2017 sales guidance assumes a comparable store sales range of flat to a decline of 2%.
For the second quarter of fiscal 2017, the company anticipates sales to be in the range of $245 to $255 million and comparable store sales to decrease 2% to 5%. July comparable store sales decreased 4.8%.
Van Heel said, “While we remain cautious in the short-term due to a choppy sales environment, our outlook for the industry and for our business continues to be positive. Our confidence is underscored by our ability historically to grow our business at an accelerated pace in difficult markets through acquisitions. Fiscal 2017 is no exception, with 10% annualized sales growth through acquisitions already achieved in just the first four months of the fiscal year. Looking ahead, we remain very optimistic about the opportunity to complete additional acquisitions in fiscal 2017, and further leverage our flexible business model, which has allowed us to successfully navigate through any consumer or operating environment.”
Modern Tire Dealer's columnist Nick Mitchell wrote earlier this month about Northcoast Research Holdings LLC's decision to downgrade Monro stock from "neutral" to "sell." Read about that here: Industry Analyst Downgrades Monro Muffler Brake Shares.
Read about Monro's start into commercial tires here: Monro Muffler Brake Enters the Commercial Tire Market