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Monro Blames Weather for Lower Sales

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Monro Muffler Brake expects sales to fall $8 to $15 million short of initial projections for its third fiscal quarter due to mild winter weather.

The company alerted the investment community to its weaker sales results in a Securities and Exchange Commission (SEC) filing on Jan. 11. Monro's third quarter ended Dec. 26, 2015.

The company says third quarter sales were weaker than expected due to unseasonably warm weather in the northeastern and north central regions of the country, which resulted in lower demand for tires. In regions not impacted by warm weather conditions, Monro experienced positive comparable store sales with positive mid-single digit comparable store sales in its southern markets.

Here's how Monro has revised its fiscal outlook:

Initial 3Q Projections Revised 3Q Projections
Sales - $247 to $254 million Sales - $239 million
Comparable store sales – up 2.0% to 4.0% Comparable store sales – down 2.5%
Earnings per diluted share - $.53 to $.58 Earnings per diluted share - $.46 (includes $.05 per share of due diligence costs)

Tire category comparable store sales decreased approximately 4.5% for the quarter, comprised of a 7.5% decline in tire units, offset by a 3% increase in average selling price versus the prior year period.

Despite the adverse weather impact, the company’s traffic for the quarter was flat, as were comparable sales in non-tire categories, taken as a whole. Comparable store sales in key service categories remained positive, including an increase of approximately 2% in brakes and 6% in alignments.

The company is maintaining its guidance for the fourth quarter of fiscal 2016, including total sales of $232 million to $240 million, based on a comparable store sales increase of 2% to 4%, and diluted earnings per share of $.40 to $.45.

“Our overall results for the third quarter are lower than initially anticipated due to the impact of the unusually warm weather, primarily on our tire cate gory across our northern markets,” says John Van Heel, president and chief executive officer.

He says comparable store sales fell 9% in November but are up 9% in the first two weeks of January.

“While comparable store sales increased 4% in October, we experienced a decline of 9% in November followed by an increase of .4% in December. As winter weather has normalized, we are encouraged by the improvement in comparable store sales in the first two weeks of fiscal January, which have increased by approximately 9% on positive tire sales and traffic trends.”

The company is preparing to grow through more acquisitions, according to Van Heel.

“We remain confident in our ability to drive strong top and bottom line growth organically and through our disciplined acquisition strategy. We continue to be very optimistic regarding the significant number of acquisition opportunities we see in the marketplace. To capitalize on acquisitions and other business opportunities, we are also in the process of increasing our credit facility from $250 million to approximately $500 million, further strengthening our ability to drive long term growth.”

The company will release its fiscal 2016 third quarter earnings before markets open on Tuesday, Jan. 26, 2016.

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