Monro CEO Hopes July Sales Are a 'Step in the Right Direction'

Battery sales led the way for Monro Inc. in the quarter ending June 24, 2023, with sales up 18% year-over-year for the period. Tire sales were up 1% in the quarter.

But those category increases, along with a 3% rise in service tickets, were partially offset by 2% drops in both brakes and alignments, and a 9% decrease in front end/shocks.

The company recorded total sales just shy of $327 million, down 6.5% from the $349.5 million in the same period in 2022. The decrease is attributed to the 2022 sale of Monro’s wholesale business, which a year ago contributed $23.9 million in sales for the quarter. (The company did receive another $4 million of its divestiture proceeds from American Tire Distributors Inc. during the quarter.)

Comparable store sales increased 0.5% in the period — the smallest increase in the last five quarters.

Monro has been focusing on a group of approximately 300 small or underperforming stores, and the company says those stores reported a 1% sales increase. A year ago, comparable store sales were up 2.8%.

New stores — which includes stores not yet owned for a full fiscal year — contributed $1.6 million in sales.

Net income for the quarter totaled $8.8 million, down 29.3% from the $12.4 million captured in 2022.

But early indicators are that July numbers will exceed those from July 2022. The company said month-to-date retail sales were up 0.6%. Mike Broderick, Monro’s president and CEO, called that “a step in the right direction.”

Broderick said the company’s comparable store sales growth “fell short of our expectations.

“The shortfall was primarily driven by lower-than-expected sales due to customer deferrals in some of our key service categories in June. Broad-based inflationary pressures have persisted, such that the consumer slowed their purchases of some of our higher ticket service categories.”

Though those numbers fell short, Broderick notes that customer traffic counts “were in line with our expectations, and remained consistent with improving traffic trends in the back half of fiscal 2023.

“Tire margins returned to solid footing, but our overall gross margin in the quarter was impacted by a lower sales mix of our high-margin service categories.”

That resulted in two things — higher material costs, and a continuation of labor cost pressures.

Broderick said, “As a result, we took swift actions to reduce non-productive labor costs, including overtime hours in our stores, which allowed us to preserve margins and profitability.

“While we will likely need to see an improvement in the overall health of the consumer before we can fully capitalize on longer term industry tailwinds, we will remain relentlessly focused on achieving our mid-single digit comp store sales expectations.’

And this, he said, is how Monro plans to do that:

• Accelerating growth in those 300 small and underperforming stores,
• Maintaining a balanced approach between tire and service categories, with competitive pricing, and
• Continuously improving the customer experience.

Broderick said efforts to expand gross margins will result in a continued focus on appropriate staffing and training Monro employees on how they can maximize their productivity.

“Given the current pressures on the consumer, we are also laser focused on maximizing profitability through prudent cost control, which includes rightsizing our fixed costs and rationalizing unproductive labor. While we take these actions, we will not cut productive labor at the sacrifice of our standards and to the detriment of our long-term service model.”