Monro's 'Underperforming' Stores Are Leading the Way
Monro Inc. identified 300 "small or underperforming" retail stores and focused on some basic initiatives — including improved technician staffing and store-level training. The result: those stores outperformed the rest of the company by leaps and bounds and increased sales by 15%.
In the rest of the company’s stores, comparable sales for the same period were flat.
Monro President and CEO Mike Broderick told investors the company is “intently focused on continuous improvement of in-store execution.” And he says the results in those 300 stores show the strategy is working.
“In the first quarter our retail comp store sales grew approximately 3%. Comp store sales in our 300 small or underperforming stores increased 15% in the quarter.” And he noted those same small, underperforming stores recorded an 8% decrease in the previous fiscal year, which ended in March.
And so far, Monro’s preliminary figures for July show those 300 stores are still making gains — even while the pressures of inflation and the uncertain economy are evident elsewhere. (Broderick says Monro started noticing consumers changing their behaviors in late May and early June.)
Early July data shows comparable store sales dropped by 1% in July. However in those 300 small or underperforming stores, sales are up nearly 10% for the month.
“Our first quarter demonstrates clear progress. In order to meet our mid-single digit comp store sales expectations we still have important work to do. It is now about properly training our technicians and reallocating resources between the front of shop and back of shop investments to maximize store productivity.
“We are focused on training our new and existing teammates on the key in-store processes that drive sales and deliver an outstanding guest experience. These include store scheduling, phone skills, courtesy inspections and becoming our customers’ most-trusted vehicle advisors. We continue to improve in these operational areas.”
For the first quarter of fiscal 2023, which ended June 25th, Monro recorded total sales of $349.5 million, up 2.3% from $341.8 million a year ago. Net income was $12.4 million, down 20.4% from almost $15.7 million recorded a year ago.
Monro says its sales for the quarter included $11 million in sales from new stores.
Tires and front end/shocks were the leading categories in the quarter, both up 5% in comparable store sales. Brakes were up 2% and maintenance services were up 1%. Monro says alignments were down 2% in the quarter.
Sale to ATD
Monro completed the divestiture of its wholesaling business to American Tire Distributors Inc. (ATD) in June, and says the final transaction was valued at $102 million (down from the estimated $105 million announced previously.)
Monro was paid $62 million at closing, and the remaining $40 million will be paid quarterly over a two-year period, with payments dependent on Monro’s tire purchases “from or through ATD.”
Broderick says, “We are pleased to report that our partnership with ATD is off to a great start giving us much better availability, quicker delivery and better pricing.
“Aside from the cash flow generated by this transaction, it has sharpened our focus on our retail store operations. This is our core strength and where we will concentrate all of our energy and resources.”