MNRO - Earnings call 1 2024

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Operator

Good morning, ladies and gentlemen, and welcome to Monro Inc.'s Earnings Conference Call for the First Quarter of Fiscal 2024. [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'd now like to introduce Felix Veksler, Senior Director of Investor Relations at Monro. Please go ahead.

Felix Veksler

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

is Investors we that corporate.monro.com/investors. be we that note started, referencing on part presentation Before please call, as get website of section our of this a available at the will

X, filings suggested presentation performance. If Slide those includes affect release. the materially or otherwise, future new results intention our statements Monro's or your future are outlined some required disclaims whether results as The factors statement draw company remind except forward-looking may most from to and in could or that to earnings the forward-looking of law. like Monro's I as our harbor any future to comments result update with today. could participants revise information, in Actual events differ safe by any attention on I'd that by obligation SEC our significant about The statements, a

statements discussion Reconciliations measures of and included information management's for of be measures. not GAAP call, supplement and part today's the our presentation comparable comparable in to include today's be to as non-GAAP on of financial such release. which intended a will Additionally, substitutes are measures, earnings GAAP certain supplemental

With President the Michael that, I'd Officer, call like to Monro's Chief and turn Executive over to Broderick.

Michael Broderick

customer our service of driven lower-than-expected through shortfall, June. primarily the our we on our acknowledging the and by first Thank results walking you, set Felix, and higher-margin earnings fell part expectations good like to due which May. I'll to first quarter that call that our of morning, off by in call morning, this everyone. start I'd short in the spend categories last sales was deferrals

categories. persisted such their the higher Broad-based service ticket purchases of inflationary slowed some of our pressures consumers have that

we profitability in preserve overtime lower-than-expected swift sales. allowed result action costs, stores, a this, of our on to margins nonproductive reduce hours and labor As to which took including us

to our plans despite consumer-related our fiscal in I'll deliver the conclude improved are that some industry year with of others this headwinds experiencing. and earnings we

I'd all our I to advisers thank and started, challenging environment for in our get serving Before trusted like teammates recognize vehicle what macro continues customers. be as to a of

turning our we that quarter took the Now reduce and labor results costs. first to actions nonproductive to

first of of Our sales expectations. quarter store growth than less fell comparable X% short our

by store As for I in due to consistent were driven our stated that overall our of deferrals This stores with resulted primarily key the in in June. customer lower-than-expected earlier, the service comps categories underperforming XXX was shortfall comps our in quarter. some sales also small

comps our traffic short consistent of While in half with of our in expectations remains the improving the counts quarter expectations, line in trends back and fell fiscal XXXX. traffic customer were with

and reduce profitability margins XX% sales in overall margin allowed relative the in overtime sales. material to And footing, while swift including expectations. year-over-year was returned down mix our our lower solid nonproductive service by costs to on our our labor gross hours a continued stores, to labor margins quarter percentage were pressures This as sequentially. sales resulted higher We preserve actions cost a of to and higher-margin took in lower-than-expected impacted of and tire XX% which categories. costs, This us

our manage We will maximize continue store to to and productivity. closely labor costs expense

improved to deliver our Now concluding earnings fiscal plans this with year.

mid-single-digit to the comp industry consumer need health longer-term overall improving we store competitive experience. achieving and pricing XXX see to traffic improvement growth underperforming accelerating store through categories our focused continuously remain expectations our balanced will a maintaining an in small fully tire stores, tailwinds, can and of While service sales we or approach our drive customer our between with capitalize relentlessly in on before will the on likely we

approximately up Encouragingly, the right a which sales in June our preliminary step is are trends a that direction. X%, fiscal July fiscal saw positive comp and we store sales in of growth the rebound for

our We teammates will productivity. expand also maximize to our stores through properly to and gross strive their margins appropriate in training our staffing

the control, current also we unproductive profitability maximizing on labor. laser-focused given rightsizing However, are rationalizing through fixed includes prudent which consumer, and on the pressures costs our cost

of we While the our service cut we and will the take standards these model. productive actions, labor to at not sacrifice of long-term detriment our

for In better cash of and their leveraging by stores. and optimizing and cost vendor our addition, of will inventory continue strength parts tires availability, to create in we the quality partners

to to remain In over closing, our we our levels business longer back a the gross double-digit are path restore that confident margins term. with on pre-COVID well is margins we positioned, and operating

provide With that, quarter will an I'll first additional overview financial color position fiscal the who XXXX. performance, Brian, over of Brian? Monro's call strong regarding to now and turn

Brian D'Ambrosia

you, Thank Mike, everyone. good and morning,

and stores in Slide million $XXX decreased Turning distribution quarter of Sales XXXX. first approximately the to store in sales divested our X. first for million. of these prior year the million were divestiture from year-over-year in $X Sales Comparable the approximately and tire was fiscal X.X%, to due increased X.X% assets wholesale new which first to $XX the quarter. increased sales assets quarter,

and from as Gross margin our sales, an as wholesale well of assets offset and higher which inflation. flat distribution wage lower of technician higher and in to primarily as headcount well compared distribution due investment by both occupancy incremental costs as year, from the resulting as divestiture XXX material percentage prior basis costs a tire labor technician costs was the benefit to points were of

wholesale shareholder of sales period. the sales the assets, and divestiture office our recapitalization of tire the in year or of costs related compared as to increase costs operating our principally related back million from year, million sales structure net as as XX.X% a in the were planned tire to due to a distribution wholesale $XX on our Total sales decline gain to resulting the period. capital and sale expenses of prior or and was percentage The equity well from assets distribution XX.X% of our optimization transition year in the as current matters prior $XX.X

This million million in to or prior X.X% for is $XX.X the the sales sales. $XX.X of Operating first or year of X.X% period. to declined quarter compared income

expense principally interest This to period $X.X last to year. a to decrease due was million same as decreased weighted the debt. compared $X.X million in Net in average

divestiture. to prior deferred to was rate tax expense an tax wholesale prior revaluation effective income operations tax because an in various in approximately million XX.X% the changes is mix as rate The of year rate balances was the or year which our due or in to XX.X%, the period. Income $X.X compared primarily $X.X period higher effective of of effective well million to tax U.S. of discrete divestiture tire the in tire distribution of of due impacts the related tax jurisdictions locations as pretax state the and tax

and reconciliation fiscal items years. period approximately further as in of earnings first earnings compared the this $X.XX refer morning's press on million year. in the $XX.X was per same excluded for release fiscal Adjusted period non-GAAP year. first Slide our for same last $X.X million details presentation compared share Net to per to the Please is per $X.XX. in earnings was adjusted EPS X share, our of $X.XX of a diluted diluted regarding earnings last in adjusted measure, compared was XXXX. both income in Diluted to quarter $X.XX the to This diluted share earnings of quarter

million financial highlighted working XX quarter, approximately during the As our cycle capital X, first Slide generated solid of the to end cash to quarter conversion in by continue period. a at operations maintain $XX $XX including the on we very This position. million reduced reductions. year the of has first days We prior compared from cash

capital quarter XXX% of at versus fiscal $X dividends. XXX% in distributed Our the principal payments of proceeds. expenditures, spent million for We leases $XX We million first invested AP $X in to XXXX. million at end was end million financing inventory $X divestiture in and received ratio the the in

environment, expense program, to our quarter the the under us the which pay of up debt to repurchasing reduce company's some shares our we down interest million rate given of repurchase stock. $XXX Lastly, authorizes versus interest common in opted to first to higher

our during used million We to significant invested $XX quarter. first by flow have capital the cash reduce

we first of equivalents At bank and and bank had a of the X.Xx. of debt cash $XX net $XX end million, cash million quarter, debt-to-EBITDA the ratio of

guidance, full are are color assist your year in not modeling. we providing we providing While to

is comparable week inclusive our We of to fiscal performance mid-single-digit which extra expect drive or fourth higher sales low store through to outsized an sales and in stores, underperforming quarter. XXX our sales of small year-over-year growth in

investments labor by to and which reduction higher year-over-year inflation. through occupancy We our due will of productivity continued actions, sales costs pricing as wage percentage partially a a margin fixed offset and base gross nonproductive of sales lower from be drive improvements in our to expect distribution payroll, improvements and

to are well the operating Total due costs base our expenses expected store impact to increases as be support departmental sales in inflation. direct a of to and as higher as percentage of year-over-year

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

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

improving continued to by expect our also We reductions. operating capital continue working driven cash flow,

repurchases is expected capital our returning return meaningfully to and dividends to invested capital. through Our value-enhancing approach as as balanced opportunistically share shareholders on of acquisitions completing increase well

now closing the I'll turn remarks. call back Mike that, with to And for some

Michael Broderick

for beyond. outlook our and about optimistic We're Brian. Thanks, fiscal XXXX

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

With it that, turn operator to for the I questions. will over now

Operator

Brian today question Nagel from First from Instructions] comes [Operator Oppenheimer.

Brian Nagel

monthly but as first your but even you numbers running mean, question June basis, So I -- I the just really we're not just discussed at the mean X-year through down, And looking slow did have, I'm over comps. in multiyear just a a on I here looking stack. script, and the

As I -- but given something something may to have the the mean business, like know what even occurred. you of that? more caused mentioned at you it had June I inflationary have you the specific just seemed trajectory look pressures,

Michael Broderick

slowdown is Mike. this tire it industry-wide, I'll was Brian, tire, saw that. board, the is What in units. significant Yes. take across we

And I look I our moved categories count so a see we I customer overall my what the footprint. It right tire healthy was on and in of category. did service was actually the unit. into just a all transactions, tires, compression on invoice category was item, categories. much and of we it tires the see, say, much our okay. was Just the What -- as the would in high-ticket would of, a invoices, our tire across tire at then some in balance decent It Brian, service high-ticket pretty was lack pretty board driven the low-ticket by

Brian Nagel

you day, to Mike. here spurred the that. at up mid-single-digit backdrop. this you've it the repositioning objective And Monro. you the of to and we are guidance an leverage I It's now, What that to there it. that as in the mean the to business -- ongoing We've release look levers clearly, in get a lot, to here be? about business longer-term want really consistent know I what But But I reiterate levers at comps. Got talked kind of you kind longer-term the unfavorable can discussed incremental you you -- what -- pull where to specific there's get -- guess do

Michael Broderick

creating Everything been good Monro ourselves the that with. are. to teams no what managing Yes. very full customer be to can dealing talk now are environment so for a We're don't divestiture. we about teams have to sell, all we work and is that payroll we're of question. we've anymore. out that's passed circumstances That's marketplace are better matter we're divested create the and our the a that We nimble preparing doing we the where point to year have But the able doing payroll to -- a that for a manage assortment

really sales lever improve, we As can up.

on the decline, getting done As significant been they've you really actually an over that's, I And been pretty on an is the tenure out. and the work team would payroll. say, controlling time. emphasis is I'll payroll sales over take can give I've has here example: -- that we that

biggest in our especially in As for to our And technicians. right we with stores. every really every we're hour have really going that we that to that pull agenda, it's so wage managing productivity is the be dealing inflation can our the maximize small is with say we invest people important. I now fixing lever store would

in for low-volume stores years were to be we linear, But these My when never that these those most comps are Although at look to underperforming. is double-digit stores, took stores stores. supposed expectation it stores. be of deliver these them I

has which tire is these on adverse So an have missed it adverse when a impact the or maybe transactions a transactions, ticket, they week, comp. really X good -- result X and were of

low several when tell time consistent volume years to have at us get stores, order And it's there, results. in took the to Brian, have to I take some going it to for me look I you,

a secondly, little a work environment sure team is we that bit different for lot I that a have go sales think is I customers culture, And positioned to the doing think well of just coming the our the backdrop, mid-single-digit really a that of are that better in with that a making culture, after we're help in. creating number.

Operator

comes Daniel next Our question Stephens. from from Imbro

Daniel Imbro

to there the on want on stores. I follow question underperforming second up Brian's

need the a XXX outlook comment consumer the low really get implied gave things stores. driven Brian think that release the before year just to about, but was in you improvement to in of I'm trying I turn it with comps, marry the by kind better. mid-single-digit the that to better this

that be like you're in how control? then may that specifically, guess, what I things drive X store And So to underperforming now next much more improvement are changing the right improved months? over your the maybe of

Michael Broderick

Yes.

the focus the on So people. these I -- lot stores, of would it the a is say people in

for the the the got our the with with experience foundation get started to on people very coming create improving right right So organization, say, the is customers. I We've beginning, that team stores. I would to these from for underperforming agenda the

able We're Obviously, Now in do walked that support better that so better we better I've customer what doing we creating attracting to through we work better have past, are are training. to and creating holistically a retention. technicians initiative? environment. the everybody we're

at better we tire now that outside business, I year tire category Now a the we're have divestiture assortment. the overall, on look our when the assortment, full of wholesale a of

entire we're and are OPP we're fact margins. looking at customers of assortment. talked the we're producing that I've looking lot the that the at able share tires, of We very we selling. data very that feel manage we're mix market actually the to like I margin our at In own, healthy with I'm our our tires holding and happy It's meeting sold our how the a performance mix a about the tires. past, with right of looking and

lot of to 'XX in to breaks help margin. the underperforming focusing these well stores, executing on work as work of still on And the managing have every underperforming the or stores, drive that a time. in These There's things we're of we're are focused X to done I've lot week's talked us trajectory about past. all think their and takes These it chain. week I service our front of categories. being as of help us we of able transactions still conversation in changes a just sales the a these that stores, period type stores. really and X in rest I'm when be significantly

Daniel Imbro

hours sequential my in growth Or labor for then left there here. think I XX%. And nice as a Comps how you cost remaining the there. like fall That until to I time, seems really margin of over about helpful. dig hours base? the gross these That's bit it. is the much little classification? terms of you follow-up, managing would think into accelerate a guess said nonproductive percent like comps to wanted into what remove guys Got still maybe I nonproductive

Brian D'Ambrosia

to that. time through taken not that labor. We're know do and huge is going any still actions that doing a this out into of we're this we or quarter, What to -- how past Brian, is Daniel. we drive We're is the specifically much the we've continue We productivity to it Yes. that believe do organization unproductive unproductive focus is go there.

As touching growth. truly Mike his are prepared is anything feel we in that avoiding supporting our we top remarks, line said

out So after those that's why competing each comp we with mid-single-digit labor. go are we store feel like other. managing sales still can carefully X And while things unproductive

including of line store cost direct At the about top all we're against managing well prudent back our backdrop. outside the same really time, being to structure we're fixed make office sure as labor, costs obviously that other

Daniel Imbro

framework. the guess of And kind I the then you provided outlook, within

margins of Is of which driver? be driven up by sales that, said part more further I actions? by Like will those levers is think gross improvement, or year-over-year. is which bigger the the more you cost that

Brian D'Ambrosia

mix I both. a think it's of

some we've us. first of coming ahead think, up easier I gross of all, comps got margin

So the that's first we And I the thing. think is expect that then able mid-single-digit comp. second to that be thing to drive low to

same to do leverage at we'll looking rationalizing that, anything get But we and the flow can we fixed we're costs. like pricing through. improve As said, do our we for variable time, actions, against

line a it's both think I top mix other of and So actions.

Operator

to now [Operator Jefferies. Instructions] turn We Jordan with Bret

Bret Jordan

Did us a feeling for the in quarter, some counts traffic? what versus SKU sort same price car give about to year-over-year you I talk mean, contributed of

Michael Broderick

fact traffic decline, brought the low single that digits. our I single low digits was up

So waiting I our backdrop, decline, data when even in, I of when at in single-digit improvement driven ARO. appropriate more very or invoice business way. we in have have look I it. been like sure look Brett. I on low a at feel tire And We healthy units like what customer just industry that. we've didn't even feel traffic have the part is and to actually give by at into significant unit color though maybe had just That I I making was the actually our here focusing decline, business can -- a comp, We the came we that is that's a trend. have it and tires we're an we're didn't look though that very Even Monro low managing really

Bret Jordan

Yes.

the sort could -- recap? the quarter cost Or that number? of anything the in Was of then sort there of that pre-spend that was out expenses, was was that you And the ultimate carve called a what was on nonrecurring out Okay. recap. in you've the

Brian D'Ambrosia

Yes. associated those normal fees the No, I mean and with are expenses just recapitalization.

Bret Jordan

give monthly us Okay. And comps? could then you the

Brian D'Ambrosia

April, in up May We down in Sure. X.X% X.X% and were in June. X.X%

Bret Jordan

And regional dispersion, Great. Coast then any versus versus Southeast? Okay. West Northeast

Brian D'Ambrosia

-- slightly below. where Northeast, obviously, the consolidated we above Yes. the Midwest comped West of We a our and was comps. In the lot have stores

South well. below little was bit a as

Operator

hand and Q&A. closing Broderick, to CEO, Mike This for our President I'll concludes now remarks. back

Michael Broderick

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

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

Operator

call thank you We'd and Ladies for concluded. like today's participation. your now to has gentlemen,

lines. may You now disconnect your

Monro (MNRO) 26 Jul 232024 Q1 Earnings call transcript