On July 31, 2024, Monro Inc (MNRO, Financial) released its 8-K filing announcing financial results for the first quarter of fiscal 2025, ending June 29, 2024. Monro Inc, a leading provider of automotive undercar repair and tire services in the United States, reported a decrease in both revenue and earnings, missing analyst estimates.
Company Overview
Monro Inc operates a network of company-owned service stations offering maintenance, repair, tire, and fleet management services. The company focuses on undercar services such as brake, steering, exhaust, drivetrain, and suspension systems, along with specialized tire replacement and service stores.
Performance and Challenges
Monro Inc reported a 10.3% decrease in sales to $293.2 million for Q1 fiscal 2025, compared to $327.0 million in the same period last year. This figure fell short of the analyst estimate of $293.59 million. Comparable store sales also declined by 9.9%, a stark contrast to the 0.5% increase in the prior year period. The company faced declines across various categories, including batteries (-6%), tires (-8%), alignments (-9%), maintenance services (-10%), brakes (-13%), and front end/shocks (-15%).
Financial Achievements
Despite the revenue decline, Monro Inc achieved a gross margin increase of 220 basis points, primarily due to lower technician labor and material costs as a percentage of sales. However, this was partially offset by higher fixed occupancy costs. Operating expenses decreased to $95.9 million, or 32.7% of sales, compared to $97.0 million, or 29.7% of sales, in the prior year period.
Key Financial Metrics
Operating income for Q1 fiscal 2025 was $13.2 million, or 4.5% of sales, down from $17.3 million, or 5.3% of sales, in the prior year period. Interest expense slightly decreased to $5.1 million, and income tax expense was $2.3 million, with an effective tax rate of 28.5%. Net income for the quarter was $5.9 million, compared to $8.8 million in the same period last year. Diluted earnings per share (EPS) were $0.19, missing the analyst estimate of $0.37. Adjusted diluted EPS, a non-GAAP measure, was $0.22, down from $0.31 in the prior year period.
Commentary and Analysis
“We drove a significant acceleration in our comparable store sales trends as the first quarter progressed. Importantly, we turned the corner in our tire category with a return to growth in units in the month of June, as we continued to leverage the strength of our manufacturer-funded promotions,” said Mike Broderick, President and Chief Executive Officer.
Broderick added, “We are confident that we have begun to see our recently implemented initiatives take hold and this will enable us to achieve our second quarter objectives.”
Financial Position and Dividends
Monro Inc generated $26 million in operating cash flow during Q1 fiscal 2025 and ended the quarter with total liquidity of $477 million. The company paid a cash dividend of $0.28 per share on June 18, 2024.
Environmental, Social & Governance (ESG) Initiatives
Monro recently released its fourth annual ESG Report, highlighting its commitment to creating an inclusive culture, delivering world-class service, positively impacting communities, and making sustainable decisions for the environment. The report is available on the company’s corporate website.
Conclusion
Monro Inc's Q1 fiscal 2025 results reflect significant challenges, including declining sales and earnings. However, the company’s efforts to improve gross margins and implement strategic initiatives show potential for future recovery. Investors will be keen to see how these initiatives impact performance in the coming quarters.
Explore the complete 8-K earnings release (here) from Monro Inc for further details.
