Tire sales at Monro Inc. were down 2% during the second quarter of the company’s 2018 fiscal year, but acquisitions and new stores helped the nation’s third-largest tire dealer increase overall sales to $278 million.
For the period ending Sept. 23, 2017, Monro sales were up 13%, from $245.9 million a year ago. Net income dropped to $17.3 million, from $17.5 million in fiscal year 2017 — a decrease of 1.2%.
Monro’s income-to-sales ratio for the quarter was 6.2%.
The $32.1 million increase in sales is attributed to $34.4 million in sales from new stores, including $29.1 million in sales from recent acquisitions. Comparable store sales were down 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.”
Monro said comparable store sales increased in two categories: brakes were up 6%, and front end/shocks were up 2%.
Alignment sales were flat, and tires and maintenance services were both down 2%.
Brett Ponton, CEO and president of Monro, told investors that the flat sales of alignments was the first positive data point for alignments after five consecutive quarters of declines.
Tire units were down 4%, but those were partially offset by higher tickets.
“We believe softness in tire units is in line with negative trends impacting the industry, demonstrated by the fact we continue to see off-invoice rebates from tire manufacturers in reaction to industry wide slower sell through,” Ponton said. “Despite lower unit sales retail tire pricing across the majority of our markets has remained stable, a trend we expect will continue.”
Operating expenses increased by $6 million to $74.1 million, or 26.7% of sales, compared to $68.1 million, or 27.7% of sales in the prior year period. Monro says 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% of sales a year ago.
Monro opened 23 company-operated stores during the quarter, and closed six locations, ending the period with 1,136 company-operated locations and 107 franchise stores. Monro completed a previously-announced acquisition of 20 stores in Indiana, Illinois and Michigan from Auto MD and Speedy Auto Service.
“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 Ponton.
“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.”
Modern Tire Dealer also has the details on five key ways Ponton seeks to improve Monro. Read that here: Monro CEO Identifies 5 Ways to Improve Store Traffic.
