Monro 2Q: more income, sales and acquisitions
Monro Muffler Brake Inc. posted net income of $13.6 million on net sales of $205.3 million for its second quarter ended Sept. 28, 2013. That compares to income of $11.5 million on sales of $176.5 million for the same period last year. The company also says it will buy 10 stores in three states.
With the 18.2% increase in net income and 16.3% increase in sales, the company’s income-to-sales ratio was 6.6%. Operating income for the quarter was up 21.2% to $23.9 million versus $19.7 million in the prior year period.
The $28.8 million increase in sales was due to an increase in sales from new stores. Monro added 12 locations and closed six locations during the quarter, ending the quarter with 940 stores.
Sales from recently acquired stores totaled $33.9 million but were offset by a decrease in comparable store sales of 2.1%.
The decrease in comparable store sales of 2.1% breaks down as follows:
* maintenance services down 2%;
* tire sales down 6%;
* alignments down 4%;
* front end/shocks were flat;
* brakes up 4%; and
* exhaust up 5%.
Monro announced it will acquire ten stores in Delaware, Maryland and Kentucky. Annual sales for the 10 stores are approximately $15 million and are about 55% tires and 45% service.
Monro says the locations fill in existing markets and leverage its existing Mr. Tire and Towery’s Tire brands. The company says it plans to retain store-level employees, and the closings are expected to occur in late Nov. 2013.
On Aug. 18, 2013, Monro completed the acquisition of 10 Curry’s Auto Service stores in the Washington D.C. metropolitan area. Annual sales for these stores are approximately $18 million, comprised of about 80% auto service and 20% tires.
“Our results in the second quarter indicate that customers remain conservative in their spending,” says CEO and President John Van Heel.
“However, they continue to turn to Monro for purchases that can no longer be delayed as well as to perform basic maintenance on their vehicles. While we were disappointed that our tire sales remained weak during the second quarter, we were encouraged by a recovery in our service business, with comparable store sales in exhaust and brakes both up more than 4% year-over-year.
“We were also pleased to see continuing strength in comparable store oil changes, up approximately 2% year-over-year. Driven by improvement in our margins and the continued outperformance of our recent acquisitions, we were able to deliver bottom line results within our expected range.
“We remain confident in our ability to further increase our market share and deliver strong overall sales and earnings growth regardless of the economic or operating environment, by leveraging our strong business model and pursuing our disciplined acquisition strategy.”
Based on current visibility, business and economic trends, and the recent and pending acquisitions, Monro anticipates the change in fiscal 2014 comparable store sales to be in the range of minus 1% to 0% and is narrowing its estimated fiscal 2014 diluted earnings per share to a range of $1.58 to $1.65, from the prior range of $1.58 to $1.70.
Monro now expects its sales for the year to be in the range of $830 to $845 million.
“Our near- and long-term outlook remain the same as we noted earlier in the year," says Van Heel.
“Our long-term view of the industry and our business remains positive, although trends-to-date in the third quarter have been challenging, with month-to-date comparable store sales through October 22 down 2.8%, due primarily to weak tire sales.
“We expect that near-term trends will remain somewhat volatile as the economic environment continues to influence consumer purchasing behavior. Our outlook for the remainder of the year reflects our year-to-date sales run rate, benefits from our improving margins and cost control, and the contribution from our recent acquisitions.
"However, we continue to believe that sales, particularly of tires, should benefit in the second half of the year with more normalized weather patterns throughout our markets following two consecutive years of warm winters and associated customer deferrals, although we have not incorporated this potential upside into our outlook.
"As we have previously noted, we will actively manage our business in the current environment, with a focus on driving top-line growth, while controlling costs and gaining greater economies of scale through acquisitions.
"On a combined basis, the acquisitions we have completed and announced to date in fiscal 2014 represent nearly 5% annualized sales growth, and we are encouraged by the opportunities for additional attractive acquisitions by our fiscal year-end.
“We will continue to leverage our strong business model, and we are confident that our long-term strategic plan will enable us to continue expanding market share and deliver shareholder value regardless of the economic or operating environment.”
For details on Monro’s first-quarter results, see “Monro income and sales up; to acquire Curry's.”