Monro Muffler Brake Inc.’s first acquisition of 2016 may prove to be one of its biggest yet, as the company is using it as the foundation to enter the commercial tire market.
In May Monro acquired McGee Tire Stores Inc. Its 29 stores and one retread facility in Florida continue Monro’s aggressive growth in the Sunshine State. Since its first Florida acquisition two years ago, Monro now operates 83 stores throughout the state, and those stores represent $115 million in annualized sales, or 12% of the company’s overall sales.
According to the McGee website, of those 29 locations, five stores offer a combination of retail and commercial truck service. Three of the five commercial stores offer off-the-road tire service.
“McGee’s is predominantly retail, about two-thirds, but it includes a larger commercial component than other businesses that we have previously acquired,” John Van Heel, Monro’s CEO said during a call with investors on May 19, 2016. “As we look ahead we plan to grow this component of McGee’s business in Florida as we believe it is complementary to our retail business, and when combined with our overall scale will lead to significant savings on material costs in that business.
“Based on our results in Florida we will continue to evaluate the many opportunities to expand our commercial business throughout the remaining 24 states we operate in.”
Van Heel said Monro will focus on Florida first. “There’s a big opportunity down there,” he said, and later noted, “We’re looking to anything that makes sense.”
Monro says the McGee stores are expected to add $50 million in annualized sales.
Prior to the acquisition, McGee was tied 40th on the Modern Tire Dealer Top 100.
Monro is continuing its plan to grow through acquisitions. In July 2015 the company revealed it had more than 10 non-disclosure agreements in the hopper, and Van Heel repeated those words during the company’s latest earnings report. Those agreements represent dealerships with between five and 40 locations.
He said if Monro’s tough start to its 2017 fiscal year is any indication of the larger market— the company’s 2016 fiscal year ended March 26, 2016 — the next year may be a banner year for acquisitions.
Traffic in Monro stores is down so far in the quarter, Van Heel said, and higher taxes seem likely “no matter who is elected” president in November. Those factors may prompt more independent tire dealers to retire and look for a way out of the business.
“I already expect fiscal year 2017 to be a good year for acquisitions,” Van Heel said.
Read about Monro's fiscal year 2016 results here.
