Monro posts record first-quarter sales, rise in net income

Monro Muffler Brake Inc. on Thursday reported record first-quarter sales, beating Street estimates.

The automotive undercar repair and tire service chain recorded sales of $278.5 million for the quarter ended June 24, up more than 18 percent from $235.3 million in the first quarter last year. The sales increase was attributed to sales from new stores and an increase in comparable-store sales.

Net income for the quarter was $17.6 million, compared with $16.8 million in the same period a year ago. Diluted earnings per share were 53 cents, however when adjusting for management transition costs, earnings per share were 55 cents.

Analysts surveyed by Zacks Investment Research had expected diluted earnings per share of 54 cents on revenue of $273.21 million.

First-quarter comparable store sales increased 1.4 percent, compared with a decrease of 6.9 percent in the first quarter last year. During the first quarter, Monro opened seven locations and closed six, ending the quarter with more than 1,100 company-operated stores.

The company also announced it has signed an agreement to acquire 20 stores, including eight from an existing Car-X franchisee. The stores fill in existing markets in Michigan, Illinois and Indiana, and are expected to add $13 million in annualized sales.

Twelve stores will operate under the Monro name, while eight will continue to operate under the Car-X brand. The purchase is expected to close in the second quarter.

“We are pleased to report that the outperformance of our recent acquisitions and positive comparable store sales in the first quarter, combined with our continued focus on margin improvement, enabled us to deliver earnings per share at the high end of our guidance range, when adjusting for management transition costs,” said President and CEO John Van Heel. “These positive trends have continued into July with an increase in comparable store sales of approximately 1.5 percent quarter-to-date and higher margins in both our tire and service categories.”

Last month, Monro announced Van Heel would not seek to renew his contract with the company when it expires in October. Monro named Brett Ponton as the company’s next president and CEO.

Additionally, Monro chairman and former CEO Robert Gross will retire from the board and the company at the conclusion of the annual shareholder meeting on Aug. 15. Robert Mellor has been elected as independent chairman.

Van Heel, who has served as CEO and a director since 2012, will continue to act as an adviser to the company through March 2018.

In the days following the leadership transition announcement, Monro stock fell to a 52-week low, hovering around $40. But following the company’s first-quarter earnings call this week, shares of company stock (Nasdaq: MNRO) spiked more than $5 to $47.70 in heavy Thursday morning trading.

“I am confident that our team will be able to effectively leverage Monro’s unique business model and capitalize on the significant opportunities for profitable growth both organically and through accretive acquisitions and greenfield expansion,” Van Heel said in a statement. “The outlook for the industry remains positive, with the total vehicles in operation, particularly those 6 years old and older, set to grow significantly over the next several years.”

Going forward, Monro is well positioned to build on its strong foundation and deliver value to its customers, Van Heel added.

Based on business and economic trends, Monro expects fiscal 2018 sales to be $1.135 billion to $1.155 billion. Monro expects comparable-store sales to increase 1.5 to 2.5 percent for fiscal 2018. Diluted earnings per share for the year are expected at $2.05 to $2.20.

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