Monro Inc. closed its 2024 fiscal year in March with a 3.7% decrease in overall sales, which it attributed to consumers who have either deferred tire purchases or traded down to lower-tiered tire brands.
For the year, Monro’s sales totaled $1.277 billion, down from $1.325 billion in fiscal 2023. (Monro’s fiscal calendar closes in late March.)
Comparable store sales dropped 2% for the year, and 3.9% when adjusting for the length of the fiscal year. (The 2024 fiscal year had 368 selling days, compared to 361 in fiscal 2023.) A year ago, Monro’s retail business grew sales by 3.5% during the year.
Total operating expenses for the year totaled $380.7 million, or 29.8% of sales, compared to $376.4 million, or 28.4% of sales in 2023. Monro says the per-dollar increase was mostly attributed to $3.3 million in “higher non-recurring costs” throughout the year.
Net income for 2024 was $37.6 million, compared to $39 million in the prior fiscal year. Monro says it generated $125 million in operating cash flow during the year, and as of March 30th had total liquidity of $475 million.
Monro President and CEO Mike Broderick said, “We expanded gross margins, both in the fourth quarter and for the full fiscal year. We continued to mitigate a challenged topline with actions to reduce non-productive labor costs, including overtime hours in our stores.
“While an industry-wide deferral and trade-down cycle has lasted longer than most in our industry would have expected, we are navigating weakness in the tire market well with our actions and our recently implemented initiatives. We have made foundational progress that will enable Monro to reap benefits when tire volumes recover.
“Our business is durable, well-positioned to withstand the current downturn and poised for long-term success.”
Tire dynamics and actions
Monro says it is responding to the current dynamics in the tire business. The retailer noted, “tires are providing a temporary but meaningful negative impact” given the company’s approximate 50% tire mix.
Monro says low- and middle-income shoppers are deferring purchases of higher-margin tires and “disproportionately trading down to tires at opening price points, which is being supported by an oversupply of lower-margin tires in the U.S.”
The company differentiates higher-margin tiers of tires as “branded” products, and says those tires have a higher average selling price. The supply dynamic of those tires is currently “normal,” Monro says. But the lower-margin, opening price point tires — unbranded tires — come with a lower average selling price, and currently a robust availability in supply.
Monro says it is taking three actions in response to this industry picture:
- “Leveraging the strength of our manufacturer-funded promotions to optimize our assortment for improved tire profitability with a higher average selling price per tire;
- “Maintaining market share in higher-margin tiers; and
- “Accelerating proportion of opening price point tires.”
The company has also invested in modernizing its 32-point courtesy inspections from a paper process to digital. That new tablet-based platform has been rolled out company wide, and Monro says it is “pleased with early results.”
Fourth quarter results
When the fourth quarter of the fiscal year closed on March 30th, Monro recorded sales of $310.1 million for the quarter, down just 0.2% from the $310.1 million in the prior year.
Because this fiscal year had an extra week of selling days in it compared to fiscal 2023, the fourth quarter included $24.4 million in sales from that extra week.
When accounting for that difference in the length of the fiscal year, Monro said comparable store sales decreased 7.2% when adjusted for days.
“This was primarily driven by a strained low-to-middle income consumer that traded down to tires at opening price points as the industry worked to clear through an oversupply of lower-margin tires,” the company said in its earnings report.
When adjusted for days, those comparable stores recorded drops in the fourth quarter, compared to the same period a year ago, in each of the broad categories that Monro reports:
- Batteries: down 1%
- Alignments: down 4%
- Tires: down 6%
- Maintenance services: down 7%
- Brakes: down 9%
- Front end/shocks: down: 14%
Operating expenses in the fourth quarter totaled $99.7 million, or 32.2% of sales, compared to $97.6 million, and 31.4% of sales, the prior year. Operating income in the quarter was $10.3 million, compared to $6.2 million a year ago.
Monro reported quarterly net income of $3.7 million, up from the $0.4 million in fiscal 2023.
During the fourth quarter, Monro closed eight stores. The company ended the fiscal year with 1,288 company-operated stores, plus 51 franchise locations.
