MNRO - Earnings call transcript Q1 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen, and welcome to Monro Inc.’s Earnings Conference Call for the First Quarter of Fiscal 2023. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] And as a reminder, this conference call is being recorded and may not be reproduced in whole or in part without permission from the company. I would now like to introduce Felix Veksler, Senior Director of Investor Relations at Monro. ahead. go Please

Felix Veksler

everyone, this Hello, you joining for Thank call. and on morning’s us you. thank

to about may Before some please events presentation law. I’d Slide today. SEC get website differ attention statements we forward-looking that outlined on we that to started, or by participants future our Investors earnings like intention at will future forward-looking this part materially from the Actual a presentation update results Monro’s as Harbor the new could those required our whether be obligation information, to company are in call, and corporate.monro.com/investors/investorresources. of the suggested otherwise, could or of If The by future remind referencing draw comments The of Safe revise in performance. X, a section that results as with statements any release. factors any most filings I available note except is includes result our our Monro’s significant disclaims that affect your as on statement or

management’s will Broderick. our of over measures to Michael President call to today’s be included intended earnings for of not a GAAP Monro’s measures. supplement include measures like information Officer, which on Additionally, are certain be today’s turn in non-GAAP of to call the comparable GAAP Chief comparable substitutes release. such and discussion as supplemental I’d Reconciliations presentation financial and part to With that, statements and Executive the

Michael Broderick

evidenced our distribution well wholesale morning capital everyone. as divestiture as progress update and recapping our then quarter’s of and first call in quarter, Felix, we’ve by this assets non-core allocation. part of results. first the morning, the the good I’ll the strategy an tire spend our provide discuss you, on and completed Thank made as I’ll our our

leader service auto in aftermarket resilient and the We are industry. a highly largely non-discretionary

products our demand in success model and of remains and our for Given the our business the hands. services, resiliency robust our

We are in-store of continuous on intently focused improvement execution.

our staffing needs of increased our Over meet the we in last in XX to order have levels stores customers. months, the

more We improvement locations. are focused and to productivity profit our sales plans at on drive

which are to quarter We overall a underperforming our of stores, strategy our base. about store improve represent our also executing

of quarter results In this retail small show for that XX% first approximately Our in store quarter. this X%. the XXX group Comp in is sales sales stores quarter, working. store strategy or grew comp our our stores underperforming the increased first

comp these approximately quarter. fiscal the the levels X% improved decreased at softer As in store compared these sales a customer demand. remaining our consumer at to XXX in stores XXXX. were The stores in stores acceleration Comp meet training sales flat. to technician by reminder, stores fiscal was demand and sales staffing XXXX, These experienced in of result

While this a the demand, factors miles fuel impacting least at pressures was inflationary a partly prices softness number consumer, can the on higher negative of to and impact driven. based due impact broad including

that share tire We in the but our satisfied are are top results, line our not unit we quarter. market increased encouraged with

we hours. our the point an from year. basis percentage These inflationary quarter in additional head in basis same in points stages our in sequential of resulting investments are improvement believe and to the overtime of we hour and stores increase built pressures Regarding versus demand. final labor capacity customer rightsizing tech labor our XXX by reduction staffing, wage last count in meet XX and This was in costs increased have store labor the X% sales per in a a as the sales period technician

the our store meet to our training about shop store resources do. technicians important sales in and now maximize It mid-single digit investments of we to clear productivity. between demonstrates expectations progress work shop still is quarter of back Our growth to comp front and properly first reallocating order have

that in-store courtesy on key inspections, focused our and new customers on most and vehicle drive becoming teammates outstanding These skills, our are trusted existing the and We training deliver sales advisor. store phone experience. an includes processes scheduling, guest

improve in these areas. to continue We operational

our While for comparable softness in comp up small store or less consumer X%. in continued sales of in a underperforming store July in remaining in XXX locations resulted XX%, nearly were locations demand our than preliminary sales decrease fiscal

Now are almost that complete. initiatives staffing our

carefully expenses which in to managing are profitably. business, We expect we the drive

productivity capture sales gross we investments, to to continue staffing we technician margin expect and deliver our XXXX as progresses. improvements better As results from fiscal

successfully American million the we Tire the $XX completed we approximately last will million paid ATD into with over at the remaining to from We a the received us them. of closing agreement Distributors entered million. connection with supply $XXX announced In tire be based tire on years or two our our and in quarterly we turning distribution purchases June, value of and $XX total for Now divestiture divestiture wholesale quarter. to to assets transaction through

We with giving pleased are ATD start, quicker and pricing. off much availability, to better great that a report partnership is delivery, to better our us

to I’d generated this all on of over operations. over our core hard to of the ATD, customers. for their to is store ongoing has we Aside in finish future. This our in our concentrate at strength all teammates bringing thank our those will and cash dedication all the it flow to retail from transaction, their our energy like our also and best And from the like where focus sharpened resources. transaction who the partner teammates line wish for work this and transitioned our

our divestiture as our from operations our balance by strength the continue of allocation. capital generated to and update retail time to sheet The pursue allows us to shoulders return excess capital an strategy. received Lastly, on completed our proceeds the same growth the being cash at our we

authorizes our which us quarter, common program, we our up in first to through began our our expanded stock. repurchase share dividend $XXX with the During our policy of longstanding increase sharing we shareholders on company’s an to the of results repurchase and executing million

growth have acquire to of review carefully we while businesses As We into In in which acquisitions value strategy, fit our capacity our maintaining approach to discipline significant continue believe our part strategic we overall uncertain services. evaluating multiples. enhancing and opportunity we and there’s as execution results firmly products macro our demand control. our environment, for an In-store our improving in for summary, is greatest continue navigate is to plan. robust

retail Our focus or first on and initiatives staffing the our delivered underperforming stores small growth quarter. store in sales comp

flow continued productivity will an through repurchase training capitalize fiscal focus a XXXX. return as overview wholesale now share improvements turn on Monro’s capital and Brian? first to hold, our over will dividend us allow to entire sharper strong financial and Brian, The well sales distribution allow provide I’ll With As cash shareholders we retail operations. performance, of in to that, our healthy for initiatives divestiture expect our earnings. and assets will deliver to call take color non-core generation as programs, on who quarter’s of position, acquisitions. and regarding the Significant additional

Brian D’Ambrosia

good Thank you, morning, and Mike, everyone.

note the XX. of getting the includes of financial first the June quarter our and of wholesale assets quarter, specific Before discussion through that into distribution tire results the details performance divested the

sales $XXX.X Total increased from comparable Turning X, quarter. million year-over-year while sales $XX first the million. to X.X%, increased new store X.X% to stores increased sales in Slide

same incremental sales The in X.X%. cost than sales due basis also growth top support headcount to sales due or and margin margin retail We a growth. incremental lower store categories. year-over-year million is interest quarter weighted sales. comparable to This decreased was debt. sales declined $XX.X an Total or points in or Material sales. fixed and points expenses sales and a to the resulted $XX.X compared a divested period million whole and in the gain in quarter, investment to year. million improved comparable in estimate distribution was Operating $X.X XX.X% the due of tire share decrease expected and closing U.S. $XX.X of the of the changes as primarily locations net with for assets, occupancy in of to compares year, wholesale Income our one acquisition in costs a or prior due $X.XX basis the service was net diluted sale warehouse distribution of per of $X.X and share Net year XXX operating last in divestiture. average Gross due costs, or that mix well was compared tax our tire prior the to closing was the decreased diligence towards related of to a impacted per divestiture. litigation were one-time rate in This to by gross compared of prior to income sale of increase year-over-year related tire $X.XX year state year costs. impacts gain quarter revaluation selling million wholesale The tax share a line settlement sale, related various to driven divestiture quarter, $X.X well and warehouse was million and share million million decrease locations period of to share in distribution the prior as million as in $X.XX in income of $XX This from tax tire effective earnings period the $X.XX compared expense percentage income period. costs wages compared the prior by increased to percentage store balances the costs tax of due in for sales was margin effective current the to X.X% share last as in $X.X excluded pretax technician expense in which Net items the of X.X% pre-tax the same shift per $XX.X of per period. related effective the of of with higher year. adjustment associated to store adjusted as non-GAAP per assets, XX%. again, assets, XX.X% same Adjusted $X.XX associated deferred tax tax costs Excluding for last deferred as principally because and discrete year entire this $X.X costs, jurisdictions, million of period. a XX.X% of and per as related $XX.X future jurisdictions of revaluation share, of an or investment benefit of costs higher operations, rate XXX higher prices of excluded million state decrease because as million changes was on on the as the distribution our sale our $X.XX closing to mix prior share excluded the to to million cost as in various year an measure income principally to of Diluted earnings first the the per in an well the the mix estimate year. integration settlement the from period the the XX.X% closing $X.XX tax year a time U.S. compared rate of and litigation and tax same balances in $X.X of The last of $X.XX cost $X.XX per as certain diluted the period. closing for earnings to locations, of to the to due

in million $X spent escrow. $X continue $XX leases capital a operations highlighted million in which including million reductions. quarter, record to in working cash in for of financial dividends. are We principle capital financing held on payments invested We a We’ve million in first currently maintain we million solid expenditures, generated from the million of X, As $X position. distributed and divestiture very $XX received in $XX Slide during being million $XX proceeds

cash equivalence authorized our bank X.X end share a stock. our $XXX board approximately of million debt-to-EBITDA times. million, million the of of repurchase the quarter, cash we $XX debt we and $XX under Lastly, At net of bank first program, of repurchased common ratio had and

$XXX in for not modeling. the to into fiscal million are Note divestiture, XXXX we in that guidance in While XXXX, for we of our comments fiscal about color fiscal sales generated assist your which providing remainder are providing XXXX. factor

divestiture expect We to to impact be to accretive per earnings from and ongoing the margins and share. gross operating the neutral overall

sales, lower tire which Total be than year-over-year year-over-year actions. a expected sales our As tire retail our locations, result higher as operating percentage have to higher pricing put our pressure service percentage locations. by of a XXXX, and in margins will on that to a wholesale slightly higher are basis made sales divestiture as store the drive expenses fiscal offset continue the wholesale we investments in more to divestiture of locations the on should margin of labor gross in this of be a

be the remainder should for XX% rate of approximately XXXX. fiscal the tax Our

to in spend fiscal expect $XX Regarding our XXXX. $XX million capital we approximately to expenditures, million

believe completing sales now And improvement that In We capital flow as improvements operating will earnings, This of that invested as on expect call returning be with our reductions. addition that, and turn the by the balanced in return meaningfully also shareholders, I to increase capital as operational our cash as closing our over Mike well to to improvement we capital. continued profitability benefit we driven to approach acquisitions generation. some enhancing will will expect value well an back remarks. for our improved working

Michael Broderick

Thanks, Brian.

for of about optimistic the our outlook We’re beyond. and XXXX remainder fiscal

for strategy our important shareholders. do. creation deliver strongly have We we to value work growth Although, execute well that believe our long-term we remain to positioned and still

wanted we Before briefly two to I to address. topics move questions,

governance our structure. First,

have capital not power structure dual the that our the capital does consistent have nor equity We in fact class its recapitalize been company the structure. to company’s right unilaterally regarding and the disclosures

Second, all the I to on will be the that of in compliance want with operator act the interests and I over questions With is for board the it shareholders will of is quarter. its duties fiduciary securities than laws. in aware well to continue and advised more best turn now that, to clear

Operator

Thank Instructions] you. Thank [Operator you.

for Inc. from line Daniel, Imbro now Our today question first from open. comes is your Stephens Daniel

Daniel Imbro

taking Yes. for morning, question. Thanks good Hey, guys. our

Michael Broderick

morning. Good

Daniel Imbro

category. on I to Mike, actually wanted tire start the

your unit in has think increasing remarks, ubiquitous growth mentioned that was prepared – how share country. you two-year a increased. curious about the one talk ticket market comp strongest saw Could that and I down on of a much and or been versus share are break price doing your that markets inflation. you that all unit unit increase the markets You how I’m that And in how on share and stack, acceleration nice maybe kind share, market just across how of

Michael Broderick

Yes. Daniel. Thanks,

parts – on would market on specifically I’ll me might also questions other and share. I the the time, follow-up speak same at market introduce tires, to share Let but there around because be like

I separate share. market So

industry all about We have good data, tires. data,

We parts category, power around answer have go I with tires. we that good with to don’t So categories. the would a trying service doing all to and be tire have and same But view questions your and a really the we southeast They significant country, also quarter. nice say, really the growth the across across saw market, had but a northeast. saw nice, first I in change south,

down at all the were looking significantly the wise the driven share, market to We was So don’t now we overall it industry It want units was get with specifics, we price. also, – quarter. were able to into through optimize down first in price. were but

because I those seeing those June. comp, to deferred. It was a customer moving the X% from way. trade maintenance all in I was the May with early I way. I of then down one that to going affected do starting services, parts very customers feel although, back, the that’s when to the that’s were expecting better services look much in X% to things of deferred I two definitely through in sudden customers started believe coming and at do be So tires like month need be down look a I to numbers. forward just mean, I’m good four much the like And all comp, on still like tires believe provided. we of slowed we happy tire. And I seemed

Daniel Imbro

tail little and about And bit towards Got you mentioned initiative then you employee the then the staffing, staffing, a Mike, kind of end helpful. talked but training. you’re it. on That’s really of

the day so team asked working we’re in-store roll the kind you initiative. And How do day responding think being guys curious change guys of then how’s kind to Thank teammates about what should operations that or and in we to the training, on You responding. are in the are at implications that to where are margin their out more you of much. stores? as

Michael Broderick

what Yes. take to what about here able trained it’s be it’s because trying in big a to be And properly. class That’s best service a first care time the of our having all is – a do, really I retailer. customers we’re of portion question, really associates

do one a the coming a service we mean, to do recently, something on to any courtesy I a really everybody like we we’re and It’s expand actually inspection our more past just opportunity how and we people things say, mean, consistent courtesy So agenda there, the long vehicle? out different I do. I’ve way lot retailer, perform about their a We how talked I challenge make every how a that’s inspection, work say, customer, there. think for really a would greet answer we comfort for in have we level. part a it’s that’s I to on of don’t phone, vehicle. of how would I do time. life significant a of us. been

investing that. to technology We’re in help augment

additional focusing We’re They’re say Monro we is, from life the the And better profit. web. our really line. significant been I destination majority that regards the has who actually but positive Monro touch through The service training. following light. engine the not benefiting way. news to people categories with coming in going, see we’re past, flows gross it’s they’re good in a bottom anything like in has where not to doing it improvement on a the a that right And services of check actually always our start are teams

our with that balanced So focusing all categories approach, new a nice comes focus, on training it our initiatives. really life having is to and

Daniel Imbro

Great. luck. Well, best of

Michael Broderick

Daniel. for Thanks question,

Operator

you. Thank

now Brian, from question open. next comes Nagel Brian your Oppenheimer. is from line Our

Brian Nagel

morning. good Hi,

Michael Broderick

Brian. Good morning,

Brian Nagel

kind can. I line, if them of few together merge – So I but a questions on maybe have I’ll top

always So – and just comments first, about make I back I the of kind correctly. understand want talking prepared going to this going initiatives. to the Mike, sure

saying hear in, sales now better the – So I that underperforming performing mean, better seen the think stores. the they’re stores what response is which a where you’ve there performing labor historically performing the well, you and I I initiatives under you lag are put historically – these nice but

want that, had you just on my is to stores there then in at performing So a I you I these historically put understand sure place performance And initiatives dynamic better question that then to that there? what that, in have be even would as drive in correctly. can so are better look make

Michael Broderick

Yes.

got You it, Brian.

deceleration. our all saw strong customer, coming I was And a was where about the going. where stores actually So in We company growth were the off really May. optimistic

So stores, small come – about led changing of we stores, these are and the declines. that a we good to year-over-year stores, saw our all talked training, they attention. staffing stores it’s small just more talked life And emphasizing we about lot these and by really they need really about have

more and responded immediately. put our we attention So and responded they customer

that’s back, I reflect good started changing coming definitely challenge and consumer we we’re consumer traveled, come I into I that miles mean, the June Now back base, – about the in the the with then just when my working we would all think at to going vehicle looked I July. behaviors prepared to remarks, it’s buying consumer from June, do say, aftermarket. in I do May and automotive news the the believe on, their

to your still You to service vehicle. have going

on prepared So deferred getting focused ready that. for and and going very all much that’s we’re to be

putting in together. marketing We’re initiative

We’re focusing on training.

And stores. to properly on in wanted all focusing staffing of We’re that back comes advantage customer of when our we our take stores.

Brian Nagel

Got it.

at, seeing impacts to a the clearly my then that across you see And inflation this your maybe follow-up, the this at we’re intensifying consumer starting what’s you’re because point, you’re or impacts business. to regard on and more discussing Okay. look so that’s topic

your based are could – to be guess broadly think I there the or it’s it’s you consumer category, You would is the take inflation inflation there, more actually that? or it reacting question within then to your help offset specifically pricing,

Michael Broderick

based broad in Yes. actually believe we’ve it’s opposite because And pricing the I gone direction. our absolutely actions,

we the past didn’t talked actually this introducing better, have We’re offering I’ve and best, about before. in good, value offering where

quickly to the have to retailers where I could similar of a base the am – gas. that So the are, of They’re meet XX% actually very in are increase trying that customer we right now. affected going customer be they really most

say, So brakes value for we and offering I we three we oil in data much value especially parallel that on categories, what all talk on the could are looking things sure is to are syndicated would tires, of a around easily about. be think tire driving – And they categories. with very making at focused our really category. that service be, is tires have I very But changed would that the I the have

Brian Nagel

it but peaks say – this of Then Look, real it so I you to final in I’ll steady? gas to question. its prices, keep painful we’re the off to type appreciate one Okay. have are quick. with prices all watching time regard started improvement as I Are or has any recent moderate know colors. gas seeing happening. been frankly, that’s

Michael Broderick

can ask one. in I maybe this – jump you Brian, on maybe can you

Brian D’Ambrosia

share would is we on seen going as see general certainly responding it’s I still even consumer inflationary of kind And I certainly think gas Mike can to of gas food pressures though year-over-year way. to there’s the along more that We’ve are that their said, miles you the But prices. shelter. come wallet sequentially. Brian, vehicle to down Yes. generally traveled say

being have largest. larger So tire pressure Mike the I categories, some of created those ticket as our certainly some think said on

Brian Nagel

guys. Thanks, it. the all color. Got Appreciate

Michael Broderick

Brian, thank you.

Operator

Instructions] Jefferies. Thank you. Our Brett is open. now comes Jordan line [Operator of from next your question Brett,

Brett Jordan

morning, good guys. Hey,

Michael Broderick

Hi, Brett.

Brian D’Ambrosia

Hi, Brett. morning. Good

Brett Jordan

morning. Good

a market comp. I categories, You commented talk yourselves Could versus standpoint? in that gain about share guess, you you comp about, broader tire within the see how from other share

Michael Broderick

the took Yes. we overall that happy happy I’m comp. only not responded, I’m our like with I just That’s number.

I higher other comp, market don’t really the to strong have share definitely look we on had though, anything even So any categories, expectations. service at Brett.

happy with mid-single very that So our not results. I on only we’re can digits. much say focused we’re And

happy. all want not mean basically Monro mid-single at more I least, I not have at I categories, customers including – including batteries, oil time. I’m ticket for to change. anything major a focused to a that customer we and but including digits, I same that’s do And like we’re be balanced my And look approach. And sharing across brakes, needs you want balance on. what I So than get last less look approach the but ticket opportunity that future. an consistent in and in also to ticket, I with really at with the it growth

Brett Jordan

X.X to count? stacked that was versus ticket traffic How

Brian D’Ambrosia

Without in ticket specifics, into getting it and was led a by in an increase decrease traffic.

Brett Jordan

Okay. in this question you capital in flow give capital, million working reduction, the Could And we up picked – working then guess size on a capital ballpark year? cash I talked you the of could in of see and more. what in working you that left $XX us about sort

Brian D’Ambrosia

Yes. guide would and a or there additional to saw it, we’re not that that do record certainly flow near cash numbers lot there we work XXXX. flow record And would continue that. capital expect or flow order and working reduction we as expect that by given fiscal capture provide improvements in A will going I to of committed move range I’m QX, we operating to and we continued what say cash a working in through improvements put on to up but and to cash benefit. expect capital record is, driving But to

Brett Jordan

the Sorry, Okay. And then in quarter? of comps the I the monthly Brian, quarterly? can the question get housekeeping

Brian D’Ambrosia

two in about and June. was almost April, May flat It Yes. in in six

Brett Jordan

you. Okay, great. Thank

Michael Broderick

Brett. Thanks,

Operator

you. Thank

today. for further We questions have no

back So the management for further to I’ll team remarks. any hand

Michael Broderick

us continues be joining today. exciting for of part to time you to Thank an Monro. This be

day. stakeholders. on to progress. updated Have strong foundation to you We upon forward value look all long-term have build create a our I to great keeping a our for

Operator

Thank you for joining today’s call.

disconnect now your lines. may You

Monro (MNRO) 27 Jul 222023 Q1 Earnings call transcript