Monro income and sales up; to acquire Curry's
Monro Muffler Brake Inc. reported net income of $13.6 million on net sales of $206.2 million for its first quarter ended June 29, 2013. That compares to net income of $11.6 million on sales of $169.2 million for the prior year’s first quarter. The company also says it will acquire 10 Curry's Auto Service stores.
With the 16.6% increase in net income and 21.9% increase in sales, the company’s income-to-sales ratio was 6.6%. Operating income was up 17.4% to $23.1 million versus $19.6 million in the prior year period.
The company says the total sales increase for the first quarter of $37.0 million was due to an increase in sales from new stores, including recently acquired stores of $36.0 million, and a comparable store sales increase of 1.2%.
The increase in comparable store sales of 1.2% breaks down as follows:
* up approximately 3% for alignments;
* up 1% for maintenance services and tires; and
* flat for exhaust, front end/shocks and brakes.
Gross margin decreased to 38.3% in the first quarter from 40.3% in the prior year quarter, largely due to a sales mix shift to the lower margin tire category related primarily to recently acquired stores. These declines were offset, in part, by lower labor, distribution and occupancy costs as a percentage of sales, according to the company.
Total operating expenses were $55.8 million, or 27.1% of sales, as compared with $48.4 million, or 28.6% of sales, for the same period of the prior year.
“Our first-quarter performance continues to reflect the volatility associated with the economic environment that has been weighing on our customers, with the positive comparable store sales trends we experienced in April and early May softening in the final six weeks of the quarter,” says John Van Heel, president and chief executive officer.
“Customers have increasingly turned to Monro to perform the work necessary to maintain and extend the life of their vehicles, as evidenced by a 2% increase in our comparable store oil change traffic for the quarter. However, they continued to defer purchases and trade down from higher cost maintenance and repair purchases, resulting in flat or slightly positive comparable store sales in key categories.
“While we are disappointed with our comparable store sales increase, our recent acquisitions contributed to earnings and outperformed our plan. Importantly, our focus on leveraging our strong business model to take advantage of increased acquisition opportunities enabled us to increase our market share and deliver strong increases in overall sales and net income despite the tough environment.”
The company added one location and closed three locations during the quarter, ending the quarter with 935 stores versus 836 stores in the quarter ended June 2012.
Monro Monro Muffler Brake also announced that it has signed a definitive agreement to acquire 10 Curry’s Auto Service stores. The stores are located in the Washington D.C. metropolitan area. Annual sales for these stores are approximately $18 million, comprised of approximately 80% auto service and 20% tires. The locations will be co-branded as Curry’s/Mr. Tire. Monro plans to retain all store level employees and the closing is expected to occur in mid-August 2013.
Based on current visibility and business and economic trends, including flat comparable store sales to-date in July, as well as the pending acquisition, the company now anticipates an increase in fiscal 2014 comparable store sales in the range of 1% to 3% and is revising its estimated fiscal 2014 diluted earnings per share to a range of $1.58 to $1.70 versus its prior range of $1.65 to $1.80. This compares to diluted earnings per share of $1.32 in fiscal 2013.
The company now expects its total sales for the year to be in the range of $840 to $860 million.
For the second quarter of fiscal 2014, the Company anticipates the change in comparable store sales to be in the range of 0% to 2%.
Van Heel says, “While our long-term outlook for our industry and business remain positive, we anticipate that trends may remain choppy for the balance of our second quarter as a result of the economic environment. In this environment, we are actively managing our business, with a focus on driving top-line growth and leverage through acquisitions while aggressively managing costs.
“As we move through fiscal 2014, we anticipate better performance as sales improve, tire and other costs continue to decline and we more fully integrate our recent acquisitions and benefit from the economies of scale that they provide.
“We continue to see attractive acquisition opportunities in the marketplace created by the challenging operating environment, which we will continue to pursue in a disciplined manner. We are confident that our long-term strategic plan will deliver increased market share and shareholder returns regardless of the economic or operating environment, as it has over the past 12 years.”
For details on Monro's year-end results, see Income drops despite Monro's sales increase.