Sales and profits at Monro Inc. decreased in the final quarter of the company’s 2023 fiscal year. One pain point the company recognized was customers downgrading to low-tier tires.
CEO Mike Broderick said the company acted “decisively” and increased prices of its lower-tier tires during the quarter (which ended March 25).
For the quarter, Monro reported a 5% increase in tire sales in comparable store sales. Batteries were up 15%, while maintenance services increased 11%. Brakes were up 5%, while alignments were down 3% and front end/shocks fell by 4%.
Overall sales for the quarter totaled $310.8 million, down from $328.0 million a year ago. The sale of Monro’s wholesale business earlier in the year is reflected in that sales drop, as the wholesale operation contributed $30.4 million in sales a year ago.
Net profit was $409,000 for the period, down from $8.6 million a year ago.
Comparable store sales increased overall by 4.5% in the quarter, which Monro said was driven by the continued focus on about 300 of its smallest and underperforming stores. Those locations’ comparable store sales increased by 7%. A year ago, those same stores improved sales by 1.4%.
Broderick said while the company met expectations with mid-single-digit comparable store sales, “our profitability in the fourth quarter fell short of our expectations. Our gross margin in the fourth quarter was impacted by continued labor cost pressures and continued customer trade downs to opening pricepoint tires.
“Although disappointment, we actively decisively with pricing actions on our opening pricepoint tires as well as reductions in non-productive labor costs, including overtime hours in our stores.”
Broderick said he’s confident the lower profitability was “isolated to the fourth quarter,” and that the company’s actions “led to an improvement in our gross margins as the quarter progressed.”
Of the three months in the quarter, he said March was the company’s strongest, and that the profitability improvements have continued as the company started its new fiscal year in April.
Full year results
For the full fiscal year, Monro’s sells dropped 2.5%, to 1.325 billion down from $1.359 billion in fiscal 2022 – due to the company’s divesture of its wholesale and distribution business earlier in the year.
For the year, comparable store sales grew 2.8%, which was down from 15.2% in the previous year.
Total operating expenses were $376.4 million, or 28.4% of sales, compared to $380.5 million, or 28% of sales in the previous fiscal year.
Net income for fiscal 2023 was $49 million, down from $61.6 million.
Acquisition update and guidance for the future
During the fourth quarter, Monro completed a previously announced purchase of four stores in Iowa and one location in Illinois. Combined, the stores are expected to ad $6 million in annual sales.
Monro isn’t providing an outlook for the full fiscal year, but did provide guidance for the first quarter: sales are expected to total $330 million - $335 million. So far, the company says its comparable store sales are up 2% in the quarter, and it expects those sales to land around 2-3%.
A year ago, Monro’s now-divested wholesale and distribution business provided $24 million in sales in the first fiscal quarter.
Stock and board actions
As part of its latest financial report, Monro announced it was eliminating its Class C preferred stock, and that the board would recommend to shareholders that the board be declassified so that all board members would serve one-year terms and be re-elected annually.
Both of those actions will require shareholder approval during the company’s annual meeting on August 15.
