MNRO - Earnings call transcript Q3 2025

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Operator

Good morning, ladies and gentlemen, and welcome to Monro, Inc.'s Earnings Conference Call for the Third Quarter of Fiscal 2025. [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, Atondo. at Monro. Please go ahead.

Felix Veksler

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

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

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

to references third like to Executive turn President in fourth Christmas the XXXX. With the X made to sales call in Broderick. that, category for sales, a Chief fiscal noted, current I'd day timing and holiday to today's store shift of which otherwise fiscal adjusted the XXXX an and quarter Michael on be the to the comparable for in call selling the quarter due on unless will all days Lastly, quarter fewer year Officer, adjusts Monro's units basis, over from in

Michael Broderick

After that, good plan in share you that objectives our I'll to accomplishments. we and fourth an This outline morning, to you, on Thank quarter. third morning, with update quarter several Felix, everyone. achieve I'd like the

to for thank like I'd to begin, teammates recognize I Monro of our all dedication and Before and our customers. their

accomplishments store second Slide quarter. a comp that to provide change with the in from sales year-over-year sequential December. to sales X, and drove of for momentum continued percentage our in year-over-year believe performance. improvement Turning returned our initiatives our We growth the starting top the We store quarter comp in line our the foundation business month in our third

store change sequentially positive with entire month both our comp year-over-year sales entire and the in the percentage improved category quarter, from the in sales second quarter. unit growth sales in of our Importantly, and comp year-over-year December, unit dollar the in

offerings. value-oriented category, by our down returning second front-end focus to both with in sales to growth. Consistent high-margin comp to quarter. We We more now strength we our ConfiDrive be completed unit this of consumer educational sequential and second third us tire dynamics, of to impacted our Tier trade general oil continued a shocks. in sales in for improve on category the store from X, relationships continue the allowed growth category quarter their we've further to selling sales that customers. offer, a communications to courtesy meet digital value-oriented the Slide change traded of that margin has drive that continued purchases down and which industry alignment in batteries, gross while quarter units manufacturer and needs of as funded the consumer. on our to allowed the X trust from and our And year-over-year process, our improvement year-over-year rollout to the and our dollars inspection change drove leverage promotions, continue with solidified us drove have improvement and shown ConfiDrive sequential we percentage our service And built we brake

our improving to near of attachment consumers pressured to committed price efficiencies selling are sales material stores. while necessary promotions our our we and through and training into investments margins remain our including unit initiatives. We this and increased growth in on profitability accounts, customer optimization puts drive it if And promotional scheduling, and productivity level in attract even and also continue improvements the value-oriented make to we and willing to self-funded labor We the the pressure term. quarter,

quarter. fourth the for objectives our to on Now

strength impacted Our store day were are the January preliminary traffic, for the in X%, will adjusted category lower down fiscal extreme temporary in sales including in store month. tire benefit months. categories, in X service additional is resulted coming weather, by weakness sales January closures selling by in This that comp store brakes. and the in extreme us weather by which our believe partially offset We driven

cost as in fourth our utilizing leverage of include the results. oil to and by accelerating well inefficiencies tire units, growth expect continued our initiatives ConfiDrive traffic line We in our improving driven which optimizing objectives, quarter through from top the our offerings maintaining service our value-oriented and summary, achieve to productivity as performance our initiatives labor trends in change control. In prudent improvements driving are benefits continued categories, key an improvement store

exited the was December sequentially December. sales, year-over-year which in category by improved the in This second store growth with positive store year-over-year the led from quarter. comp with growth quarter entire our quarter, comp we unit Our the sales sales come of month trends and in

change gross are the sales second our we investments, category, batteries front-end alignment more in improve sequential focused shocks quarter, freight and customer in puts from comp a and in to step on margin growth performance our if a counts profitability While term. in the continue the although be took even category improving on the willing And necessary we back high-margin to and make quarter. and to work unit our our to pressure the in near it and sales year-over-year quarter growth service have of improvement we year-over-year drove do store percentage

our quarter confident traction over gross initiatives line enable are to margins levels with will We on back pre-COVID to top operating our path return we as longer double-digit us from term we margins remain the growth. restore a to The fourth objectives. remainder our an performance, fiscal the I'll quarter who third that, will over it now turn strong Monro's additional to Brian, position financial overview color Brian? achieve with regarding of XXXX. provide of to and And

Brian D'Ambrosia

Thank you, Mike, and morning, everyone. good

X. Turning to Slide

driven Our million year-over-year for of decreased when points was for second a improved the unadjusted change X.X% year-over-year, days. fiscal XXXX. percentage which decreased comparable decline sales store from Sales store in XXX sequentially quarter store comparable primarily basis X.X% sales $XXX.X adjusted of by sales Comp days. X.X%

store month of December. in to As the Mike sales growth just walked through, business comp we returned our year-over-year

digits X% reference, November. the X% driven up December. were October quarter down down up growth in For X% were in and mid-single-digit by in in quarter, low December. the during single comps We units the units of third in Tire month exited

store tiers market comp XXX underperforming quarter. We than in basis our points and about Comp sales our higher-margin our share in of in small the or quarter. overall higher the higher also gained approximately stores were XXX

refer of our to that mix million the note earnings of declined reconciliation both which This due effective to third Adjusted $XX.X the $X.X costs to as the effective quarter of adjusted the to share debt. diluted resulting tax was sales and last year-over-year third a XXXX. a to decreased the or tax basis stores. Operating an was due to in a this same sales. related to due last $X.X departmental million and stores, quarter The and $XX.X X. sales expenses EPS decreased margin discrete the adjusted tax to year from fiscal was to to $XX.X impacts share, third negatively same $X.XX, compared income Slide of presentation principally million was the an our rate attract technician EPS prior $X.XX Net sales. XX.X% in shift state consumers period quarter operating for partially weighted into XX% appendix of $XX.X the the of last Income of interest offset period. level compared compared the primarily compared holiday period an $X.X the Slide million in X.X% in our diluted and income value-oriented percentage $X.XX XXXX. Please Gross as taxes, year for in diluted returns. Net expense on by Total and higher the was million support of same store in was costs to earnings $X further items increased earnings audit year. tax diluted This rate X.X% or promotions state diluted cost awards release share by expense fiscal in Diluted to direct per to effective to Turning due quarter a million Please measure, third million tax principally in of to share-based primarily or in to which earnings prior prior is was year and an for million dollar morning's self-funded this as XXX to material regarding press $XX is difference compared compared per Christmas our points million The of XX period. tax tires on to excluded is average details of were both prior fiscal labor to approximately $X.XX years. higher rate prior within EPS to $X.X the $X.XX. compared of or settlement income year per adjusted decrease in XX.X% in in certain is year. increase of or or impacted non-GAAP as period of This earnings XX.X%, million year. lower period. basis compared sales year, is

we $XXX months X, cash maintain million fiscal of Slide of X on generated first a during million operations the highlighted to We $XX financial including working As capital reductions position. from XXXX. continue of strong

well million spent financing net the from proceeds expenditures, inventory of end Our dividends. At million, the distributed quarter, of principal sale to capital versus third of net divestiture payments bank debt of in $XX debt-to-EBITDA X.Xx ratio $X and the improved total the a AP We $XX million of ratio end million. XXX% bank quarter $XX leases we of liquidity for and $XX million of $XXX third the million at XXXX. the as in in end million our invested in $X had at received We as headquarters. fiscal XXX% corporate to

the earlier vendor on in calls, significant expansion of margin position. fiscal have including and we partnerships our improving optimization digital have including well setting improvements, leveraging process, As first by months performance. X courtesy of on areas, the focus several approximately focus and market-facing guest strong offer gross improved our in inventory up as we foundational recent are inspection financial with foundational change earnings stores experience These initiatives, coupled our for financial our relentless made solid progress oil our on as and commented XXX underperforming and ConfiDrive our smaller XXXX, us

fourth sales XXXX XX-week expectations do so. Slide remainder note sales XXXX remain was improving week price XX-week and our year of full to is our on of counts promotional for turning Now necessary growth year the benefited extra that year the unit focused X. fiscal while an XXXX in fiscal making fiscal from and a and that the Please quarter. while to on We customer investments a

during priorities, least of strength We XXXX. us cash capital including all our our flow, to of cash remainder fund reductions dividend of XXXX. The fiscal including expect generate allocation positions $XXX working at position, million our continued operating to of financial fiscal flow our of in the capital inclusive

to fiscal Mike call for some Regarding I XXXX. And million will expect our back with now we closing million spend $XX expenditures, remarks. that, the over $XX to turn capital to in

Michael Broderick

Thanks, Brian.

industry Our strong. business that has remains in an long-term durability fundamentally

an driving volumes enable improvement flow our recover. are results. along will to Monro in to benefits top This, continue as initiatives Our generation, with reap our line cash tire

relationships win management strategic to our and experienced with are team. poised We our scale,

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

Operator

Securities. comes Instructions] from Seth [Operator first Our question Basham from Wedbush

Seth Basham

on accelerating deterioration that to the see comps whether gross mix Or progress such improvement Nice and forward? to comps. not the profit will on case. work through? see or What's not investments wondering in seeing and framework you in we'll the profit promotion price to continue And going we're comps gross be plan and

Brian D'Ambrosia

quarter, our was Yes, XXX related by XXX points of points. partially decrease basis of by basis offset XX cost material That a in margin. In the declined technician pay to points. margin gross basis driven gross

trade as down increase the mentioned, our promotions. tires material to in the well our Tier continued related as of you costs, was increase as consumers self-funded So the tire to X of

Going levels forward pressure consumer then, and we to given material higher down of expect activity. similar trade related promotional that those costs,

growth unit which to promotional continue current we're investments, price we sales improving remain customer necessary this believe we to So to and going committed our environment requires. counts, and and make

Seth Basham

is the And weather. follow-up Good to just question hear. Got my it. around

mentioned You January pressure weather. the of because in

quarter, was Looking think do the or back neutral? at or benefit weather fiscal you drag third full a a net

Michael Broderick

I January it's the neutral. a Mike. the and got And it been third just would winter extreme going in we quarter it. it's I I've we experienced say looking I say Seth, would setup think good was what a been. forward, has for weather, like

closed had we Although January categories, stores were and our stayed December tire. We brakes, service all focused had results disruptions including some coming categories, up. up and out affected on major with that momentum mostly our our service of actually

and us and is, a our take up, have say good would the set through beyond. will improvement sales that performance QX team's of sequential I So -- we our good really with and obviously, setup a winter

Operator

from comes from Lantz next Wells Our question Fargo. David

David Lantz

it improvement could drivers the in drive categories. was seeing courtesy detail you like parse of more think So you're I some bit a seems should forward? if out in benefits inspection some in digital about going the how service we curious the

Michael Broderick

look is ConfiDrive the up, but that we past was Mike. ConfiDrive our traffic call I driven talking would about the what was service look I be looking of It's results what our categories. our driven, very was results in asked been by just be are. and should ticket down, on and some average ticket objectively average our for. up I've the and at what this the When at

I've is at strong we're attaching attachment. it -- and in more to doing, was in January, first committed that is what what absolutely customers, driving well. look getting see in we're in the But count, is I in this specific it customers, but I I our my really And went actually team I I'm talked ride see I in control. time about batteries. customer see it driving need This results. growth so disappointed it We in when area. the single-digit positive. that's brake QX, a low what alignment.

So all positive. going my major service are categories

So from process expected. a customers. process. our and ConfiDrive is away what shareholders. a Monro delivering -- It's It's good for for absolutely good I our walking

David Lantz

think any it around Got it. some gross about seems if and in how here for we That's continue then fourth like pressures SG&A term. guardrails similar near helpful. year? can And Curious quarter the color margin give you could help early should next there's if

Brian D'Ambrosia

Yes.

shop the to relates had you the it we front as primary in also educational the our SG&A, experience. of ConfiDrive the an at which part refer manager process process. prior guest just to that we As driver and increase the an labor was of right resources support that investment that process as important inspection to ConfiDrive that in the It's to driver really have really front versus inspection And saw, costs, to SG&A front store deliver counter shop selling pay. year. And the labor behind was as

benefits sales. But investment. that believe continue these our obviously, just service expenses we expect G&A as going in forward, seeing, the investments So commented will Mike on category of reflect to we this we're our

continue to Of to productivity remain. in G&A the in drive course, the of ways front improvements but other we'll our areas counter investment spend, will find

Operator

Our next from Thomas Inc. Stephens, from Wendler question comes

Tom Wendler

the And now? X purposely look You does some X self-fund growth focused? of guys that Tier your promotions What customers promotions? in during is the steering tires the with then like quarter. some that still you Tier is where the mix continued And saw category are towards

Michael Broderick

Tier XXs There so driving are don't of mix the would X is sure Tier customer the X. this tires I we definitely they to that through is to absolutely Tier the X just X. Tom, The that are want attributes go presenting high say customer. on in Yes. to we And that Mike. make

back and when like the are And we continually promotions, do in that Just customers. What us. just they to or going thing said benefit back services, when fact I us then with strong high very -- with X which we that. are come recommend customers provide for me. It's we for Monro the about they're they to Tier if X. the cheap see what and so -- I come years, live tires feel the to it's emphasize doesn't the its about XX%, to is happy to on tires, important for the -- right I it XXs, other

Tom Wendler

Okay. the Perfect. has follow-up, kind And of then my been for promotions? there any in funded manufacturer slowdown

Michael Broderick

environment, industry come the I time. sure in Not sure the this for we changing nothing this [indiscernible]. journey, and the say have we're would -- point that manufacturers at making consumer very on in along focused there's making

Operator

from comes Bret from next question Jordan Our Jefferies.

Bret Jordan

the give the and comp price comp you versus traffic in us Could the breakout quarter? of

Michael Broderick

it's in digits. in single digits, down digits Mike. down ASP up middle traffic Low single Bret, up basically and digits mid-single mid-single up

Bret Jordan

update then situation of give $X You I Are could liquidity stand collect? ATD? And what's just still where And given with Great. million us Okay. left that? how you on you an they divestiture to challenges? the their guess paying is picked proceeds. up

Brian D'Ambrosia

process ATD, Yes. of million on that still on the as to terms And in the as Related stores. restructuring no have against receivable of with our during in is expectation process we our deliveries last remains part our And through. as of going I We collect changed strong relationship to that us. receivable to our operations usual is That call. business reserve our also they're full currently owed have ATD current of and nothing's amount. commentary the say and would that -- going the $X.X the to terms earnout

Bret Jordan

dispersion Northeast Southeast, Great. regional Okay. weather country, call different out performance? been big talk about but could anything to has and the then Mid-Atlantic, Obviously, West, you or there? And any your across

Brian D'Ambrosia

Midwest, the all Northeast comp. stronger than quarter. the were our And were then the little bit consolidated a the the in West than and South comp in We weaker in consolidated Yes.

Bret Jordan

Okay. oil Great. think And self-funded you promotion. out called I guess I trends, promotion

quarter the promotion that peers drive I fourth promotional as more becoming quarter. traffic think the market How do there? category it to Is see about third oil trying well? broader the is into you -- are going talked in you as

Michael Broderick

I in at marketplace. been been on, using gotten year. that Most the in in starting has Valvoline this we just would end we more quarter it sure partners, are making aggressive when of focused promotions say place. on vendor of announced been We've we've first the what the of that competitive Monro. that's have the our very And always focusing it really

Operator

Our next will from Oppenheimer. come from question Brian Nagel

Brian Nagel

My question is -- just I on bit I a gross margin. maybe to but repetitive, want focus

-- in and progression if goes like fiscal trend fiscal So think look back worse. this I Seth But -- gross the quarter, the fiscal negative you to asked quarter, the margin from question second turned more or quarter the second third at well, initially.

So on customer? out it a the mean, -- there, something just serving changed? then more And to is emphasis else play at sort of this question follow-up. Is I QX? to QX I there weakness what this incremental caused that say, an was it have value Or that

Michael Broderick

what Monro May, in and we that I were back. get that on declared Brian, our fact was changed the tires to going

into strong Going quarter, we X X. X. market a shifting And were customers Tier ceding to through X were down We losing. that were we have Tier and X offering. May The share Tier

and our to on some I now categories that's to a to about was consumer way. And service coming starting about get vendor do we those margin. We sure a And time, same it's the categories we've the to the come would the tire just see So life. service improving, And see environment. our gross life. of that improving, along drag It's At not absolutely difficult leaned make I price. And availability. of partners not back. it's we're seeing into business really really setup say lot the

So back in a quality our process going between trajectory leaning how a in the offering that going and healthy vendors additional we restore margin. have protecting that's us services, brands to their and and driving helping Monro And inspection selling place. we're

Brian Nagel

Okay.

lot given haven't QX should do recognizing the here? really from So from recognize -- there. But pieces of -- is it? a But mean moving so worst I with margin things perceive Mike, that, you gross fiscal and -- there's perspective, a you I'm guidance. getting I of should better

Michael Broderick

focused like on focused in getting our I point our I have say would a at would say, vendor they board, but protect came balanced categories I don't time, very crystal out on getting service January, approach Brian. we their we're where in a and partners getting making ball, on I sure getting that this starting And attachment of our brakes sure right now our we're back, really and come to like place -- what ConfiDrive that to life. our our with customers put are making categories other doing brands, we to I growing back. do is all strategy business see the our very in

forward Now of how to QX? about in that talking that plays months. a on look couple I

Brian Nagel

Okay. guess, Then my question. I -- follow-up my follow

taking and a margins well. you as mentioned back gross to those Brian, this mean just I You lot time, levels. over pre-COVID

mean building back So at math -- pre-cohort percentage now. peaks. the are maybe clearly to tracking the get the blocks we to bite below gross it's from nature think a I cyclical. X about you the there right I is historic bigger we're back we hope talked to blocks margins. cyclical get least mean are right this. consumer, there's and But we -- the points mean on as you're or those where What with now building X, pressures I about historic

Brian D'Ambrosia

I'll take that, Yes, Brian.

material we to to start see the our that think costs I pressure I occur. And happen need for thing see think the to improve needs the to to on that need first abate. environment we is

need see needs promotional impact, to of the activity improve. we to the So level trade-down

really -- our as sales of leverage -- the sales fixed the of as components is our first. What second leverage, cost lines. leg of because cost up of against a piece So line is that's percent well fixed related as need both we really to pay growth occupancy technician both next top those in the percent

the you back reversal to see to see healthy that down, on start a way some get to would are with levels help described. So consumer top on us the material we X trade promotions if the pull of our dose we those from a the allow costs dynamics, will of growth really environment or line back

Operator

final comes Northcoast Healy from Our question today John Research. from

John Healy

Just ask here a bit kept have levels in But little little the business. up QX. a pretty that know those period wanted a honestly, over long of in time. guys stable to posted I SG&A bit about you

So I relative fiscal just we're as that was kind you wondering where comp kind of that just rose And where drive you sales cycle. in of think at same-store hopefully to SG&A 'XX, in do store sales number?

Brian D'Ambrosia

the ConfiDrive relatively driven support continue question, to about our question, talked front office for we've on mentioned, John. to SG&A, in sales expectation that our the our in the for dollar shop line. to to current they in levels, on benefits few an effects the order our last They on the labor top about did as that to driven delever flat. On Thanks a lower And front previous Yes, that but really deliver the talked remain continue completely G&A absolute us over I the invested we've the by optimization allowed be the you seeing of flattish quarter basis, which inflation process. labor years, in we're had category costs. dynamics shop back to really by the service offset initiatives, place

take would the item up growth year. that's think a that off of biggest next normal year-over-year inflationary I G&A

line. we're top the pace our that's the investment we front a obviously lower And shop at than plus how So sure to that would ultimately, growth going in our that plan making business forward. goal growing inflation is is make that,

John Healy

little sense. just maybe how trying X, phrase the little was you some then tire Got the through low? category just to it. if difference about to kind point profile compare bit earlier of high from a And for Tier to wanted in used tiers, X guys? of margin high kind does of understand Tier the of at tiers, to kind low different the you And to price you look maybe ask a your I Makes the I X bit. reference what's

Michael Broderick

there's John, -- kind simple barometer. that that. $XX use X. would the about in of of very a take in $XX I tier. just every is it's difference make Tier a I'll X, a say margin you as -- to terms, But lot X, between $XX And stronger, generally difference,

Operator

the is session. That end Q&A now the of

Broderick over I'll Michael So hand for back remarks. closing to

Michael Broderick

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

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

Operator

This call. joining, concludes everyone. today's Thank you for

now may You lines. your disconnect

Monro (MNRO) 29 Jan 252025 Q3 Earnings call transcript