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Monro Buys 17 Stores in California

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Monro Inc. is expanding its presence on the West Coast, acquiring 17 stores in Southern California.

The deal — with Allen Tire Co. — comes 19 months after Monro made its West Coast debut with the purchase of Certified Tire & Service Centers. That acquisition included 40 retail stores, as well as a warehouse for tire distribution, which is an important tool for Monro to expand its presence in the region.

Allen Tire Co., based in Lakewood, Calif., has been led by Fred Allen Jr. All 17 of its stores are retail locations. The company was founded in 1973, and was tied for the No. 65 spot on the MTD 100.

Brian D’Ambrosia, executive vice president and chief financial officer, says adding 17 more stores — which are expected to contribute $20 million in annualized sales — adds scale and storefronts, and also helps Monro “leverage our investment” in Certified Tire.

Monro says the 17 new stores represent a mix of 60% tires and 40% service. The deal is expected to close during the company’s fiscal third quarter, which will end in late December.

The latest financials

The acquisition news came as part of Monro’s latest financial report. For the second quarter of fiscal year 2021, which closed Sept. 26, Monro recorded sales of $288.6 million, down 11% from $324.1 million in the period a year ago.

Net income fell 36.8% to $12.8 million, from $20.3 million for the same quarter last year.

Same-store sales were down 11.4% in the quarter, partially offset by sales in new stores of $9.4 million.

Monro says the same-store sales decline was primarily driven by reduced store traffic related to COVID-19 and its effect on vehicle miles driven. And although all five categories that the company tracks were down during the period, Monro’s tire sales were only off 3% from last year.

Alignments were down 16%, maintenance services and front end/shocks were down 19%, and brakes were down 24% compared to the prior year.

Monro hasn’t returned all of its stores to pre-COVID business hours, and that certainly contributes to the sales decline. The company also closed six stores during the period. Five of those locations have closed temporarily due to damage sustained by Hurricane Laura in Louisiana and Tropical Storm Isaias in the Northeast.

Robert Mellor, Interim CEO and chairman of the board of directors, said, “While the disruption created by the COVID-19 pandemic has continued to weigh on our top-line results in the second quarter and third quarter-to-date, with comparable store sales down approximately 12% in fiscal October, our performance is tracking in-line with key industry indicators.

“Given the ongoing challenges in the operating environment, we continue to focus on the aspects of our business within our control. This includes driving profitability by actively managing our store operating hours and staffing levels to match demand, as well as expanding our variable margins through improved tire pricing and labor productivity. These efforts combined with targeted cost reductions and working capital management have led to a significant increase in operating cash flow in the first half of the fiscal year.”

Right-sizing staffing

Even before COVID-19, Monro has been investing in new digital tools to help its operations. One of those tools is helping stores schedule employees in an efficient manner.

Mellor noted the company has added approximately 700 employees since the start of the second quarter — and those were primarily technicians.

As those new employees have come on board, the company has utilized its online platform, Monro University, for the onboarding system.

Rob Rajkowski, Monro’s chief operating officer and senior vice president, says the company believes those tools, part of its Monro.Forward strategy, “will enhance our competitiveness.”

Rebranding continues

That strategy is centered around a broad rebranding effort. Monro is converting its service-focused locations to tire stores and adding tire inventory to the mix. The company says its tire sales outperformed U.S. tire sales in the period, and its rebranded stores continue to outperform the others in the company.

“Our goal is to be the Number 1 destination for tires at every pricepoint,” Rajkowski said.

He said Monro transformed 43 stores during the quarter, which included rebranding 18 locations to one of its tire banners.

To date, Monro has transformed approximately 250 stores and rebranded 85 locations. The company is on track to rebrand between 100 and 150 stores in the 2021 fiscal year.

“We are firmly committed to the ongoing execution of our Monro.Forward strategy and made great progress this past quarter, Mellor said.

“Importantly, the changes we are implementing across our business will ensure Monro is well positioned to capitalize on the continued demand recovery. Our healthy cash flow and solid balance sheet provide us with the financial flexibility to execute these transformational initiatives and capitalize on potential acquisition opportunities to drive sustainable growth. We are confident that our clear path forward will allow us to deliver long-term value for our shareholders.”

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