Monro earns 13% more in fiscal 2015
Monro Muffler Brake Inc. reported net income of $61.8 million on net sales of $894.5 million for its fiscal year ended March 28, 2015. That compares to income of $54.5 million on sales of $831.4 million for its previous fiscal year.
Acquisitions completed in fiscal 2015 added 81 locations with total annualized sales of approximately $85 million, representing 10% sales growth in fiscal 2015. In the fourth quarter of 2015, the company opened 10 and closed 28 locations, ending the quarter with 999 stores. Twenty-six of the locations closed during the fourth quarter were previously announced closures of Monro stores in BJ's Wholesale Club locations.
The company’s income-to-sales ratio for the year was 6.9%. Fiscal 2015 sales increased 7.6% versus the prior year. Net income for fiscal 2015 was up 13.5%. Operating income for fiscal 2015 increased 15.1% to $109.8 million from $95.3 million in fiscal 2014.
The company says total sales increase of $63.1 million for the fiscal year was due to an increase in sales from recently acquired stores. The boost in sales from new stores was partially offset by a 1.4% decrease in comparable store sales, broken down as follows:
* up approximately 7% for alignments;
* up approximately 3% for brakes;
* up slightly for front/end shocks;
* down approximately 2% for maintenance services; and
* down approximately 3% for tires and exhaust categories.
Fourth quarter results
Monro posted net income of $12.5 million on net sales of $219.1 million for its fourth quarter ended March 29, 2015. That compares to net income of $11.9 million on net sales of $203.2 million for the same period last year. Both earnings and sales for the fourth quarter are company records.
The company’s income-to-sales ratio for the quarter was 5.7%. Operating income for the quarter increased 9.8% to $23.5 million from $21.4 million in the fourth quarter of fiscal 2014.
The sales increase for the fourth quarter was due primarily to an increase in sales from newly acquired stores. The sales increase due to new stores was offset by a comparable store sales decrease of 2.6%, broken down as follows:
* approximately 5% for alignments;
* down approximately 1% for tires;
* down approximately 3% for brakes;
* down approximately 4% for maintenance services; and
* down approximately 5% for exhaust and front end/shocks.
Acquisitions completed in fiscal 2015 added 81 locations with total annualized sales of approximately $85 million, representing 10% sales growth in fiscal 2015. Monro completed the acquisition of eight Martino Tire Stores on the east coast of Florida in March 2015. Other recent acquisitions include nine Gold Coast Tire & Auto Centers in December 2014 and 35 Hennelly Tire & Auto Inc. stores operating under the Tire Choice name in August 2014.
The fiscal 2015 acquisitions added three contiguous states to the company's geographic footprint, including 17 stores in Michigan, 52 stores in Florida and 12 stores in Georgia. Monro says these large markets represent a significant opportunity for continued store growth, while further diversifying its exposure to north central and northeastern markets. The fiscal 2015 acquisitions have an approximate sales mix of 60% service and 40% tires.
In April, Monro completed the acquisition of the Car-X brand, a chain of 146 franchised locations operating in ten states, three of which are new states for Monro. Specifically, the Car-X chain is located in Monro's current markets of Illinois, Indiana, Kentucky, Missouri, Ohio, Tennessee and Wisconsin and new markets of Iowa, Minnesota and Texas. The Car-X stores are owned and operated by 32 independent Car-X franchisees. Monro will operate as the franchisor, while Car-X remains a separate and independent brand and business as compared to company-operated locations. In fiscal 2016, the company expects Car-X to be slightly accretive to earnings per share.
Monro’s fourth quarter was marked by disruption in business from inclement weather, which negatively impacted traffic and sales across all of our categories, particularly in February, according to CEO and President John Van Heel.
“Nevertheless, the effective management of our gross margin and focused cost control, combined with the outperformance of our acquisitions, allowed us to report earnings at the mid-point of our guidance. In fiscal 2015, despite the choppy economic environment, we were able to achieve record profits and drive 80 basis points of operating margin improvement, further demonstrating that our business model is working.
“Additionally, comparable store sales in key service categories, including oil changes, brakes, front end/shocks and alignments, were all higher for the year, confirming that our customers continue to choose Monro for automotive service that they can no longer defer. These positive sales trends were offset by deflation in tire prices, which negatively impacted overall comparable store sales by nearly 1% for the year.
“However, as expected, average tire selling price turned positive compared to last year as we progressed through the fourth quarter. This operating environment resulted in a number of acquisition opportunities and we are pleased to have acquired 81 stores during fiscal 2015, representing approximately 10% annualized sales growth, which will contribute to earnings growth over the next several years."
To see what Van Heel told investors about the company’s initiatives to boost comparable store sales, including online tire sales, see "Monro plans online tire sales for fleets."