Post Pandemic, Monro CEO Expects to Gain Market Share
Monro Inc. recorded a loss of almost $3.8 million for the quarter that ended March 28, a 122.5% decline from the profit that the tire dealer recorded in the period a year earlier.
Monro works on a fiscal year calendar that ends on the final Saturday of March. For fiscal year 2020, that date (March 28) collided with the start of the economic downturn caused by COVID-19. The company saw a “substantial decrease in traffic” in the final weeks of its fourth quarter and fiscal year. Additionally, a mild winter season contributed to a decrease in sales in the company’s northern region in January and February.
Sales for the fourth quarter totaled $286.1 million, down 0.4% from $287.2 million for the same period a year ago. Same-store sales fell 9.5%, and were partially offset by sales from new stores of $23.5 million, including sales from recent acquisitions of $21.9 million.
For the full year, sales increased 4.7% to nearly $1.3 billion, up from $1.2 billion in fiscal year 2019. Monro posted earnings of $58.0 million for the year, down 27.2% from almost $79.8 in the year prior.
For the fourth quarter, Monro said comparable store sales were of tires were down 9%, while maintenance services were down 8%, front end and shocks were down 10% and brakes and alignments were down 11%.
It’s not a surprise that the full-year figures are better, but all of those same categories were down slightly for fiscal year 2020. Brakes were down 1%, tires and maintenance services were both down 2%, and the alignment and front end/shocks categories were down 3% for the year.
The company ended the fiscal year with 1,283 company-operated stores and 98 franchised locations.
Brett Ponton, Monro’s CEO and president, said, “In response to COVID-19, we took a number of proactive steps to mitigate near-term headwinds and maximize our financial flexibility, which we believe position us well to drive business continuity through the pandemic. Further, we are focused on streamlining our operations and implementing our investments in technology, which we believe will support our broader strategy and allow us to drive a stronger operating performance moving forward.
“Overall, while our operations continue to be significantly impacted by COVID-19, with comparable store sales declines in April and May month-to-date of approximately 41% and 24%, respectively, we are encouraged by the gradual improvement in traffic we have seen towards the end of May as stay-at-home orders are lifted across the nation. While we navigate this uncertain environment, we are focused on the elements of the business within our control, including advancing our Monro.Forward initiatives as we look forward to continuing to deliver long-term, sustainable value once the pandemic subsides.”
Given the current picture of the pandemic, Ponton told investors he expects April to be the low point, and that the first half of April was worse than the second half. But regions still under tight shelter-in-place orders are rebounding slower than those with states were regulations have been eased. And as has been the case even before COVID-19, the stores in Monro’s southern markets have outperformed those in its northern markets.
Asked about Monro’s market share, Ponton said it would be hard for the company to claim it was increasing share in the current environment, but he believes the company’s share position is “solidified” and that the actions the company has taken will lead it “to be a share gainer post-pandemic.”
The foundation of Monro’s growth in recent years has been its aggressive work to acquire other tire dealers and automotive service providers. In fiscal year 2020, the company spent approximately $104 million to acquire 89 stores and one distribution center. Ponton says the company is temporarily suspending its acquisitions efforts due to COVID-19.