Monro Muffler Brake Inc. reported net income of $66.8 million on net sales of $943.7 million for its fiscal year ended March 26, 2016. That compares to income of $61.8 million on sales of $894.5 million for its previous fiscal year.
The company’s income-to-sales ratio for the year was 7.1%. Fiscal 2016 sales increased 5.5% versus the prior year. Net income for fiscal 2016 was up 8.1%. Operating income for fiscal 2016 increased 9.8% to $120.6 million from $109.8 million in fiscal 2015.
The company says total sales increase of $49.2 million for the fiscal year was due to an increase in sales from recently acquired stores, while comparable store sales were flat. Comparable store sales break down as follows:
* up approximately 7% for alignments;
* up approximately 2% for brakes;
* flat for tires;
* down approximately 2% for front end/shocks, maintenance services and exhaust.
Fourth Quarter Results
Monro posted net income of $13.9 million on net sales of $229.0 million for its fourth quarter ended March 26, 2016. That compares to net income of $12.6 million on net sales of $219.1 million for the same period last year. Fourth-quarter sales are a company record.
The company’s income-to-sales ratio for the quarter was 6.0%. Operating income for the quarter increased 12.6% to $26.5 million from $23.5 million in the fourth quarter of fiscal 2015.
The sales increase of $9.9 million for the fourth quarter was due primarily to an increase in sales from new stores of $11.1 million. That figure includes sales from recently acquired stores of $9.9 million and a comparable store sales increase of 0.5%. Comparable store sales break down as follows:
* up approximately 5% for both alignments and brakes;
* up approximately 2% for tires;
* down approximately 2% for maintenance services;
* down approximately 4% for front end/shocks;
* down approximately 8% for exhaust.
“Our top-line results for the fourth quarter came in lower than initially anticipated due to the impact of a weak consumer and continued unseasonable warm weather in our northern markets,” says John Van Heel, president and chief executive officer.
“However, we delivered positive overall traffic for both the fourth quarter and the fiscal year. We believe this demonstrates that consumers continue to turn to Monro for repairs and maintenance they can no longer defer. Despite the ongoing choppiness in the market, our continued focus on margin improvement and diligent cost control, combined with the outperformance of our recent acquisitions, drove 5% higher sales, as well as 70 basis points of operating margin expansion and 10% net income growth in fiscal 2016 when adjusting for higher due diligence expense this year. This underscores the effectiveness of our business model.”
Acquisitions Update
Acquisitions completed in fiscal 2016 added 35 stores in New York, Pennsylvania, Massachusetts, and Wisconsin. Monro also acquired Car-X, a chain which includes 134 franchised locations in ten states. These acquisitions represent $36 million in annualized sales in fiscal 2016. In the fourth quarter, Monro opened six company-operated stores and one franchised Car-X location, while closing eight company-operated stores and four franchised Car-X. Monro ended the fourth quarter with 1,029 company-operated stores and 134 franchised Car-X locations.
In May 2016, Monro completed the acquisition of 29 McGee Auto Service and Tires retail and commercial stores in Florida from McGee Tire Stores Inc. The acquisition significantly increases Monro’s presence in the greater Tampa Bay and Fort Myers areas, while also expanding into Daytona and Tallahassee. The acquisition is expected to add approximately $50 million in annualized sales, representing a sales mix of 40% service and 60% tires.
Monro says the McGee acquisition is expected to be breakeven in fiscal 2017.
Monro now operates 83 stores in the state extending across both Florida coasts, representing approximately $115 million in annualized sales. The company says the state represents a significant opportunity for continued store growth and further diversification of its footprint into southern markets.
Comparable Store Sales Down 8% to Date in 1Q
“Continuing weak consumer spending and unfavorable weather conditions have adversely impacted sales as we start our new fiscal year, with comparable store sales down 8% quarter-to-date,” says Van Heel.
“However, comparable store sales in our southern markets are positive May month-to-date and were positive during our fourth quarter and all of fiscal 2016. We believe these early spring results are reflective of fewer parts failures and less vehicle wear driven by the mild winter, combined with a weak consumer spending environment.
“Our guidance for the first half of fiscal 2017 reflects these trends. However, we expect sales to improve as the year progresses, particularly as we move into the summer driving season and we lap easier weather comparisons in the second half of the fiscal year.”
Van Heel says Monro is “aggressively pursuing” acquisitions. “With a strong acquisition pipeline, we are very optimistic about the opportunity to complete additional acquisitions in fiscal 2017 and would expect these opportunities to accelerate if this difficult environment continues.
“Our long-term outlook for the industry remains positive, with the growth in total vehicles in operation and other positive trends expected to continue over the next several years. As a result, we are confident that our flexible business model and acquisition opportunities will continue to drive long-term sales and earnings growth,” he says.
Outlook: Flat to Lower Comparable Store Sales
Based on current visibility, business and economic trends, and recently completed acquisitions, the company anticipates fiscal 2017 sales to be in the range of $980 million to $1.01 billion. Fiscal 2017 sales guidance assumes a comparable store sales decrease of 2.0% to flat.
For the first quarter of fiscal 2017, the Company anticipates sales to be in the range of $230 million to $240 million, and comparable store sales to decrease 8.0% to 5.0%.
