Monro Muffler Brake Inc. posted net income of $11.5 million on net sales of $176.5 million for its second quarter ended Sept. 29, 2012. That compares to income of $15.1 million on sales of $173.3 million for the same period last year.
Operating income for the quarter decreased 21.7% to $19.7 million. The company's income-to-sales ratio was 6.5%.
The $3.2 million increase in sales was due to an increase in sales from new stores, including recently acquired stores (see below). Monro added 18 locations and closed one location during the quarter, ending the quarter with 853 stores.
Comparable store sales decreased 4.6%, which came in at the mid-point of the company’s previously estimated range of a 3% to 6% decrease. Here is a breakdown of comparable store sales for 2Q.
* Maintenance services: virtually flat.
* Tire sales: down 3%.
* Alignments: down 4%.
* Front-end/shocks: down 9%.
* Brakes: down 11%.
* Exhaust: down 16% for exhaust.
"Our second-quarter performance continues to reflect the ongoing challenges facing consumers in the current economic environment," says CEO and President John Van Heel.
"With high gas and food prices compounded by high unemployment, cautious consumers continue to defer and trade down from higher cost automotive maintenance and repair purchases. Notably, comparable store oil changes were up approximately 1% year-over-year, demonstrating that our customers continue to service their vehicles at our stores.
"Our ability to take advantage of increased acquisition opportunities with our strong balance sheet in this tough sales environment is demonstrated by the acquisitions we have completed so far this year which, combined, represent a total of $62 million in incremental annualized sales, or 9% growth.”
For the first six months of its fiscal 2013 (Monro's fiscal year ends March 30), net income was down 24.1% (to nearly $23.2 million), while net sales were up 2.2% (to $345.7 million). Operating income was down 23.2%, while comparable store sales were down 5.9%.
Recent acquisitions
1. On Aug. 12, 2012, Monro completed the acquisition of 17 service stores (13 stores in Milwaukee, Wis., and four stores in South Carolina) from Tuffy Associates Corp. The transaction expanded the company’s footprint into a new contiguous market while enabling the company to fill in an existing market.
Annual sales for these stores are approximately $9 million. The Wisconsin locations were rebranded as Monro and the South Carolina locations were rebranded as Tread Quarters Discount Tires.
2. Additionally, on Oct. 7, 2012, Monro completed an acquisition from a former Midas franchisee, consisting of five stores in Rochester, N.Y. Annual sales for these stores are approximately $3 million. Four of these stores will be rebranded to Mr. Tire and one will be rebranded to Monro.
3. Monro Muffler Brake also announced on Oct. 25, 2012, that it has executed agreements to acquire multiple stores in its markets with aggregate annual sales of at least $60 million. The closings are expected to occur in the third quarter of fiscal 2013.
Based on current visibility, business and economic trends, the recent and pending acquisitions, as well as fiscal 2013 being a 52-week year compared to a 53-week year in fiscal 2012, the company now anticipates the change in fiscal 2013 comparable store sales, adjusted for days, to be in the range of minus 3.5% to minus 2.0%.
“Our long-term outlook for our industry and company remain very positive, though we expect that near-term trends will remain choppy as the economic environment continues to weigh on consumer purchasing behavior," says Van Heel.
"Trends to-date in the third quarter remain challenging, as October month-to-date comparable store sales are down approximately 6%. However, we expect weather to normalize and drive improved comparable store sales for the remainder of fiscal 2013, as customers turn to us for purchases that can no longer be delayed.
"We would expect our short-term visibility to improve during November, which is an important month for tire sales, in particular," he says. "Historically, we have leveraged our strong business model to continue to expand our operations regardless of the economic or operating environment. This is evidenced by our fiscal 2013 completed and signed acquisitions, which represent at least $122 million, or 18% in annualized sales growth.
"These transactions continue to expand our market share which, in turn, should allow us to achieve greater economies of scale and result in higher operating margins and earnings going forward."
