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Monro profits, sales up; firm to acquire 10 stores

Rochester Business Journal
October 24, 2013

Monro Muffler Brake Inc. on Thursday reported an increase in sales for the second quarter but missed Street estimates for earnings and revenue. The company also announced plans to acquire 10 tire and service stores outside New York.

Net income increased more than 18 percent to $13.6 million from $11.5 million a year ago. Diluted earnings per share increased nearly 17 percent to 42 cents from 36 cents.
 
Sales for the second quarter ended Sept. 28 increased more than 16 percent to $205.3 million from $176.5 million a year ago.

Analysts had expected diluted earnings per share of 43 cents on sales of $210.7 million.

Comparable store sales—or sales at stores open at least one year—decreased 2.1 percent, primarily because of a 6 percent drop in comparable store sales for tires.

“Our results in the second quarter indicate that customers remain conservative in their spending. However they continue to turn to Monro for purchases that can no longer be delayed as well as to perform basic maintenance on their vehicles,” President and CEO John Van Heel said. “While we were disappointed that our tire sales remained weak during the second quarter, we were encouraged by a recovery in our service business, with comparable store sales in exhaust and brakes both up more than 4 percent year-over-year.”

Monro has completed its acquisition of 10 Curry’s Auto Service stores in the Washington, D.C., metro area. Annual sales for the stores are roughly $18 million.

The company also announced plans to purchase 10 stores in Delaware, Maryland and Kentucky. Sales for the tire and service stores are $15 million annually. It did not identify the stores.
 
Monro expects to retain store-level employees following closing of the acquisition, scheduled for November.

“We remain confident in our ability to further increase our market share and deliver strong overall sales and earnings growth regardless of the economic or operating environment, by leveraging our strong business model and pursuing our disciplined acquisition strategy,” Van Heel said.

For the first six months of the fiscal year, sales increased 19 percent to $411.5 million from $345.7 million a year earlier. Comparable-store sales decreased .5 percent, while net income increased more than 17 percent to $27.2 million, or 84 cents a diluted share. That compares with net income of $23.2 million in the first six months last year, or 72 cents a diluted share.

For the third quarter, Monro is forecasting a decline in comparable store sales of 1 to 3 percent and diluted earnings per share of 41 cents to 46 cents, compared with 35 cents a share in the third quarter a year ago.

For the full year, the company anticipates comparable store sales to decline 1 percent or remain flat. Monro has narrowed its forecast for diluted earnings per share for the full year to $1.58 to $1.65, compared with $1.32 a share last year. The company expects sales for the year to be $830 million to $845 million.

“Our near- and long-term outlook remains the same as we noted earlier in the year. Our long-term view of the industry and our business remains positive, although trends-to-date in the third quarter have been challenging, with month-to-date comparable store sales through Oct. 22 down 2.8 percent, due primarily to weak tire sales,” Van Heel said.

Monro expects near-term trends to remain volatile as the economic environment continues to influence buying behavior, Van Heel said.

“We continue to believe that sales, particularly of tires, should benefit in the second half of the year with more normalized weather patterns throughout our markets following two consecutive years of warm winters and associated customer deferrals, although we have not incorporated this potential upside into our outlook,” he added.

Shares of Monro stock (Nasdaq: MNRO) were down more than 4 percent at $44.88 in early morning trading.

(c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.
 


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