Monro's Next Stop: The Southwestern U.S.
Tire Dealer Says It Will Build If It Can't Buy
Monro Inc. has its eyes on the southwestern U.S., and the nation's third-largest tire dealer, which is known for its aggressive growth-by-acquisition strategy, now says it's ready to build stores from the ground up if it can't find properties to buy in this market.
The company's new CEO, Mike Broderick, told investors as part of the company's recent quarterly report that mergers and acquisitions will continue to be "very relevant" to the company's growth.
"We're missing a lot of space out in the Southwest. That will be a focus. Where we have opportunities to fill in, we will. I'd also like to introduce the fact we're going to start looking at greenfields as an opportunity to move faster in markets if we can't find viable M&A opportunities. We'll start building our own stores."
Monro already has made significant headway in California — and has 96 stores. It entered the state in March 2019 when it bought 40 Certified Tire & Service Centers Inc. in San Francisco, San Diego and Los Angeles. Before the end of the calendar year the company had added nine more locations: six Skip's Tire & Auto Repair Centers and three Lloyd's Tire & Auto Care stores.
Then, in 2020 it was Allen Tire Co. joining the fold, with 17 stores in southern California. And in 2021 Monro already has added another 30 locations with the purchase of Mountain View Tire & Service Inc.
Broderick told investors that building stores to fill out the company's footprint makes sense.
"There's a lot of reason for it. We have a national warranty. We want to stay convenient to our customers. So where we can't find M&A we would look at (building.) Looking at the financials obviously we're going to be stewards of the P&L and putting stores where we can get the best return for the investment. When you look at the Southwest there seems to be some open space for us to efficiently do greenfield."
How all of those new stores will be branded is yet to be seen. Brian d'Ambrosia, chief financial officer, says the company is "looking at the brand portfolio. We've acquired the Mountain View brand which is a strong brand out there. We'll look at the role that brand is going to play on the West Coast. We have the Tire Choice (brand) out there currently which is what we've rebranded some of our acquisitions with."
Both the Allen Tire and Mountain View Tire locations await branding changes, or decisions by Monro.
The branding ties into a company-wide initiative that remains underway at Monro — the Monro.Forward plan. The company has already substantially renovated or rebranded 360 stores "in a number of key markets" around the U.S. That includes rebranding 115 automotive service stores into tire locations.
d'Ambrosia says, "We continue to see outperformance of our rebranded and reimaged stores compared to our chain average." The company invested $52 million and completed work on another 150 stores in fiscal year 2021, and plans to spend another $40 million to $55 million on the effort in fiscal year 2022.
Broderick says the Monro.Forward strategy "literally touched every aspect of retail," from staffing, training and payroll to product management, pricing and marketing. Improvements were made to in-store infrastructure, including the telephone system, too.
"My job right now is bringing these puzzle pieces together so that we can maximize the profitability from these investments. It's all about execution at this point in time. The strategy is sound. The execution is really what's going to separate us from being successful or not."