Monro Muffler Brake Inc. posted net income of $5.6 million on record sales of $107.3 for its second quarter of fiscal 2007 ended Sept. 23, 2006. That compares to net income of on sales of during the same period in 2005.
Net income was affected by a $1.7 million after-tax impairment charge related to the company's Strauss Discount Auto equity investment.
The 1.2% increase in second-quarter sales was due to a 1.1% comparable store sales increase and a $12.2 million contribution from new stores ($9.9 million was related to the 75 ProCare Automotive locations that were acquired on April 29, 2006).
Comparable store sales were driven by a close to 9% increase in comparable store tire sales and an approximate 4% gain in the comparable store maintenance service category. The company opened two locations and closed two during the quarter.
Gross profit in the second quarter increased 11% to $44.1 million from $39.7 million last year. Gross margin was 41.1% compared to 41.6%. Vendor price increases on certain products, such as tires and oil, negatively impacted gross margin, and were partially offset by an increase in vendor rebates recorded as a reduction of cost of sales compared to the prior-year quarter.
"During the second quarter, our comparable store sales showed sequential improvement each month and we ended the quarter with a 5% increase in September," says Robert Gross, CEO and president. "As the external environment improved, our customers began to return to more normalized spending patterns and looked to Monro to provide many of the major maintenance services that had been deferred.
"In addition, we continued to make progress with the recently acquired ProCare locations. We have substantially completed transitioning the stores to our proven business model and the new signage is in place."
Gross says Monro is planning to launch Grand re-opening events in November, and expects these "sales-driving efforts to result in continued improvement in ProCare's results, as well as benefit the Monro stores already in these markets."
"While we view fiscal 2007 as a transition year for the ProCare locations, we remain confident this group of stores will positively contribute to our bottom line in fiscal 2008 and beyond."
For the six month period, Monro's net sales increased 8.1% to $205.7 million from $190.3 million last year. Net income for the first six months of fiscal 2007 was $13.2 million, which includes the aforementioned $1.7 million after-tax impairment charge.
Gross believes "the challenging macroeconomic environment will present us with attractive acquisition opportunities, and several possibilities are at various stages of negotiation."
