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Monro chief executive resigns

Monro Inc. President and CEO Brett Ponton has resigned from the company and its board of directors effective Aug. 19. Ponton will join ServiceMaster Global Holdings Inc. as CEO on or before Oct. 1.

Monro Chairman Robert Mellor has been named interim CEO while the company engages with a leading executive search firm to identify a successor.

Robert Mellor
Robert Mellor

“On behalf of the board of directors, I would like to thank Brett for his leadership and contributions to Monro,” Mellor said in a statement Thursday. “We have a strong leadership team in place and a solid foundation to drive a scalable platform for long-term sustainable growth. We are confident that our firm commitment to driving the continued execution of our Monro.Forward strategy combined with our solid balance sheet positions us well to capitalize on long-term growth opportunities.”

Mellor has been chairman of the board since 2017 and has served on the board since 2010. From March 1997 until January 2010, Mellor was chairman of the board and CEO of Building Materials Holding Corp., a leading provider of building materials and construction services to professional home builders and contractors, and where he had served as a director since 1991. He also serves as non-executive chairman of the board of Coeur Mining Inc.

Ponton joined Monro in 2017 following the departure of former CEO John Van Heel. Ponton brought with him more than 20 years of experience, having spent 18 years with Goodyear Tire & Rubber Co. in a marketing capacity as well as running its retail division. He also was with Heartland Automotive Services Inc., the largest operator of Jiffy Lube stores in North America, and just prior to his role at Monro served as president and CEO of American Driveline Systems Inc., which owns AAMCO Transmissions Inc.

At Monro, Ponton was tasked with continued growth through acquisition, as well as pushing the company’s Monro.Forward business strategy and store remodels focused on the customer.

Brett Ponton
Brett Ponton

“I am very proud of the progress Monro has made in its transformational journey and believe our accomplishments have established a strong and durable platform for future growth. It has been a pleasure to work with our incredibly talented and collaborative team and Board. For these reasons and many more, leaving Monro was an incredibly difficult personal decision. Monro is a strong business with an outstanding team and winning strategy, and I am confident the Company will achieve continued success in the years ahead,” Ponton said Thursday.

Headquartered in Memphis, Tenn., ServiceMaster described Ponton as a results-oriented CEO with a history of driving both organic growth and successful acquisitions.

“I am honored to assume the role of ServiceMaster’s CEO and excited to join its strong an experienced management team in leading the company forward,” Ponton said in a separate statement Thursday. “With the cultural and operational transformation at Terminix and the strategic review of ServiceMaster brands underway, the company is well-positioned for short- and long-term growth and I look forward to safely getting out in the field to connect with our team members.”

Shares of Monro stock (Nasdaq: MNRO) took a hit on news of Ponton’s departure. Company stock was trading down 8 percent midday at $54.92.

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Monro sales, earnings fall in Q1

Monro Inc. on Wednesday reported a 22 percent drop in sales and an 87 percent plunge in earnings in the first quarter.

For the quarter ended March 27, the Rochester-based undercar repair and tire service company reported revenues of $247.1 million, down from $317.1 million in the year-ago quarter. The decline was driven by a comparable store sales decline of nearly 26 percent, partially offset by sales from new stores of $12.7 million.

Net income for the first quarter of fiscal 2021 was $3 million, compared with $22.6 million in the same period last year. Diluted earnings per share were 9 cents, compared with 67 cents in the first quarter of fiscal 2020. Adjusted diluted earnings per share were 15 cents, which excluded 6 cents per share of planned store closing costs. That compares with 69 cents adjusted diluted earnings in the year-ago quarter.

During the first quarter, Monro closed 36 stores, ending the quarter with 1,247 company-operated stores and 97 franchised locations.

Brett Ponton
Brett Ponton

“Our first-quarter performance demonstrates solid execution despite the unprecedented challenges related to the COVID-19 pandemic, and I would like to thank all of our Monro teammates for their hard work and dedication to safely serving our customers. In-line with our expectations, April represented a low point in our sales performance, with May and June improving sequentially as government restrictions gradually abated through the quarter,” said Monro President and CEO Brett Ponton. “Since the beginning of the pandemic, we have taken a number of proactive steps to mitigate near-term headwinds while maintaining our focus on our Monro.

“Forward initiatives, including our technology-based store staffing model and our tire category management and pricing system, and are pleased that these efforts have begun to bear fruit. In addition to streamlining our operations, we have redirected our marketing efforts towards higher ROI digital channels and made strategic investments in technology, which we believe have been critical in helping us navigate the current environment.”

Officials said the company has completed the rollout of its collaboration with Amazon.com to provide tire installation services at all of its retail tire and automotive service locations across 32 states. Monro’s collaboration with Amazon.com is a key component of its omni-channel strategy to drive improved customer-centric engagement.

Due to the ongoing uncertainty caused by COVID-19, Monro is not offering fiscal 2021 guidance.

“Despite the challenges presented by COVID-19, we are encouraged by the outperformance of our rebranded stores during the first quarter, reinforcing our confidence in our store rebrand and reimage initiative,” Ponton said. “Our solid financial position will allow us to gradually resume this program in the second quarter as we continue our disciplined approach to capital allocation.

“Overall, we remain focused on the aspects of our business within our control, and we believe that the continued execution of our Monro.Forward strategy will enable us to emerge stronger following this pandemic and drive long-term value creation.”

Shares of company stock (Nasdaq: MNRO) were trading down nearly 2 percent at $60.08 midday Wednesday.

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Monro to close 42 stores, reports Q4 loss

Monro Inc. on Thursday reported a fourth-quarter sales decline, resulting in a $3.8 million net loss, brought about by a mild winter and the COVID-19 pandemic.

For the fourth quarter ended March 30, the Rochester-based undercar care specialist reported sales of $286.1 million, down slightly from $287.2 million in the fourth quarter last year. Comparable store sales — or sales at stores open at least one year — fell 9.5 percent in the quarter.

Net loss for the quarter was $3.8 million, compared with net income of $16.8 million in the year-ago quarter. Diluted loss per share was 12 cents, compared with diluted earnings of 50 cents in the fourth quarter last year.

Analysts had expected GAAP earnings of 32 cents per share. Adjusted earnings were 8 cents per share, missing Street estimates by 13 cents.

Brett Ponton
Brett Ponton

“Promoting health and safety across all aspects of our business remains our top priority as we work to continue to serve our customers, and I would like to thank all our teammates for their incredible work during these unprecedented times. Our fourth-quarter performance was challenged by mild winter weather conditions in January and February, and while we saw improved comparable store sales performance with the onset of spring weather in early March, we experienced a substantial drop in traffic due to the impact of the COVID-19 restrictions in the second half of the month,” said Monro President and CEO Brett Ponton. “In response to COVID-19, we took a number of proactive steps to mitigate near-term headwinds and maximize our financial flexibility, which we believe position us well to drive business continuity through the pandemic. Further, we are focused on streamlining our operations and implementing our investments in technology, which we believe will support our broader strategy and allow us to drive a stronger operating performance moving forward,”

Sales for fiscal 2020 increased nearly 5 percent to a record $1.257 billion, compared with $1.2 billion in fiscal 2019. Officials said the sales increase was a result of an increase in sales from new stores, including sales from recent acquisitions.

Comparable store sales were down 2.3 percent for the year. Gross margin for the year was 37.9 percent of sales, down from 38.8 percent in the previous year, due primarily to comparable-store sales.

Net income for the full year was $58 million, or $1.71 per diluted share, down from $79.8 million, or $2.37 per share in fiscal 2019. Adjusted earnings were $2.

“Overall, while our operations continue to be significantly impacted by COVID-19, with comparable-store sales declines in April and May month-to-date of approximately 41% and 24%, respectively, we are encouraged by the gradual improvement in traffic we have seen towards the end of May as stay-at-home orders are lifted across the nation,” Ponton said. “While we navigate this uncertain environment, we are focused on the elements of the business within our control, including advancing our Monro.Forward initiatives as we look forward to continuing to deliver long-term, sustainable value once the pandemic subsides.”

In response to the pandemic, Monro has implemented a number of business contingency plans to ensure that stores are operating efficiently. Those include:
• deferring non-critical capital expenditures, including its store rebrand and reimage initiative;
• reducing store hours and store labor to match demand;
• reducing selling, general and administrative expenses;
• temporarily pausing acquisition activity; and
• bolstering its working capital position.

Monro also has expanded its collaboration with Amazon.com to provide tire installation services at more than 200 additional retail tire and automotive service locations in seven states across the Eastern and Western regions of the U.S., increasing the number of service locations to more than 1,000 stores.

By July, Monro expects to have rolled out its Amazon tire installation services to all of its more than 1,200 locations in 32 states.

The company also on Thursday said it had closed six stores during the fourth quarter as part of a planned “portfolio optimization,” and not in response to COVID-19. Monro plans to close an additional three dozen stores by the end of the current quarter. The store closures are expected to improve operating income by some $5.1 million annually.

On Thursday’s earnings call, Ponton said likely the 42 store closures would be in the Midwest, where Monro has a high concentration of overlapping store footprints.

“I think it’s more about rationalizing our footprint there and we expect to preserve a lot of that customer and revenue demand in other stores where there is good density,” Ponton said in the call.

Monro on Thursday also announced a quarterly cash dividend of 22 cents per share on outstanding shares of common stock, payable on June 22 to shareholders of record at the close of business on June 8.

Monro did not provide a company outlook. Shares of company stock (Nasdaq: MNRO) closed Wednesday at $62.04 and had fallen to $57.97 in normal volume Thursday afternoon.

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Monro stock stumbles on Q2 earnings report

Monro Inc. shares sank more than 13 percent on Thursday following the Rochester company’s second-quarter earnings announcement. Company stock (Nasdaq: MNRO) was trading at $70.05 in heavy midday trading, down more than $10 from Wednesday’s close at $80.55.

For the quarter ended Sept. 28, the automotive undercar repair company reported a more than 5 percent increase in revenues to $324.1 million, compared with $307.1 million in the year-ago quarter.

However, net income for the quarter fell to $20.3 million from $21.8 million in the same period last year. On a per-share basis, earnings fell to 60 cents from 65 cents in the second quarter last year.

Earnings missed Street estimates by 11 cents, while sales missed by nearly $6 million.

Brett Ponton
Brett Ponton

“We are disappointed in our second-quarter results, which were significantly impacted by gross margin pressures related to higher than expected tire and labor costs,” Monro President and CEO Brett Ponton said in a statement. “However, we believe the second quarter represents a low watermark for us this year, as we quickly took action to rectify our margin pressures in the near-term and are implementing initiatives to drive margin expansion moving forward.”

As a result, Monro lowered its full-year guidance to sales of $1.295 billion to $1.315 billion, with a 1 to 2 percent comparable store sales increase. The company expects 2020 diluted earnings per share in the range of $2.45 to $2.55, compared with $2.37 per share in fiscal 2019.

Comparable store sales—or sales at stores open at least one year—were flat for the quarter. Gross margin fell to 37.7 percent from 39.1 percent a year ago.

Monro also on Thursday said it had signed an agreement to acquire 18 stores, including 14 in Nevada and four in Idaho, both new states for Monro. The locations are expected to add some $20 million in sales annually, representing a sales mix of 75 percent service and 25 percent tires.

The company’s aggressive growth-through-acquisition strategy continues with the acquisition of nine stores in California, expanding its reach in the state. The nine stores are expected to add $25 million in annualized sales, with a sales mix of 55 percent service and 45 percent tires.

Monro’s acquisitions in Louisiana were completed during the second quarter, officials said.

“Positively, we substantially completed the re-image of approximately 120 stores across a number of markets, representing a significant step forward in our store refresh program,” Ponton said. “This initiative is a critical component of our Monro.Forward strategy as it underpins our ability to drive sustainable growth, as evidenced by the double-digit increase in comparable store sales our pilot stores have generated following the completion of their re-image.”

Ponton said the company remains committed to “executing on attractive acquisition opportunities,” as seen with its two most recent purchases on the West Coast.

Headquartered in Rochester, Monro operates a chain of more than 1,250 stores, nearly 100 franchised locations, eight wholesale locations and three retread facilities in 30 states nationwide. The company was founded by Charles August in 1957 as a Midas Muffler franchise.

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Monro posts record earnings, misses Street estimates

monro-logo-300x167Monro Inc., formerly Monroe Muffler Brake, last week reported record first quarter sales and earnings, but missed Wall Street expectations.

For the first quarter ended March 30, Monro reported sales of $295.8 million, up more than 6 percent from $278.5 million in the first quarter last year. Net income for the quarter rose to $20.6 million from $17.6 million a year ago. On a per-share basis, Monro reported diluted earnings of 62 cents, up from 53 cents in the year-ago quarter.

Analysts polled by Zacks Investment Research had expected earnings of 67 cents per share. Analysts expect full-year earnings of $2.41 per share. Prior to Thursday’s quarterly report, Zacks had raised shares of Monro from a “hold” rating to a “buy” rating.

Monro officials said the first-quarter sales increase was a result of sales from new stores and a comparable store sales increase of 1.9 percent, up from 1.4 percent in the first quarter last year.

Operating expenses increased by $5.1 million in the quarter, which included $1.6 million in costs related to a new Monro.Forward initiative detailed in a recent Securities and Exchange Commission proxy statement filing.

Monro.Forward centers around four key pillars, according to the SEC filing, which will be supported by a number of investments in technology and data-driven analytics across the business. Those pillars include improving customer experience, enhancing customer-centric engagement, optimizing product and service offering and accelerating productivity and team engagement.

New President and CEO Brett Ponton said upon his arrival at Monro in October he observed “significant opportunities” to build upon a solid foundation and rich history and to capitalize on the accelerating momentum in the undercar maintenance industry.

“I developed our key strategic priorities focused on delivering a consistent 5-star experience to our customers in order to drive higher traffic and increase customer lifetime value,” Ponton wrote in the proxy statement. “I also enhanced an already capable senior leadership team with seasoned leaders in both operations and marketing to assist in executing this plan.”

In its quarterly earnings report, Monro said it had acquired eight retail locations in Missouri from Sawyer Tire Co., filling an existing market. The locations are expected to add roughly $8 million in annualized sales, representing a sales mix of 50 percent service and 50 percent tires.

Brett Ponton
Brett Ponton

In addition, Monro has signed a definitive agreement to acquire another seven locations, but did not provide details on what company it has purchased. Monro officials said the locations fill in existing markets and are expected to add some $8 million in annualized sales, representing a sales mix of 60 percent service and 40 percent tires. The acquisition is expected to close in the second quarter.

“We are off to a solid start in fiscal 2019, with sustained business momentum and robust first quarter top line performance driven by our Monro.Forward strategy,” Ponton said in the earnings report. “We believe the rollout of our strategy is progressing well as we make the necessary investments in key initiatives that will enable us to develop a scalable platform to drive sustainable, long-term growth.”

Ponton said during the first quarter, Monro addressed its store staffing to support improved traffic trends.

“In the coming quarters, we plan to right size overstaffed stores, which we expect will get us back to a flat staffing model and will allow us to achieve overall greater store efficiency,” Ponton said in the company’s first-quarter earnings calls. “As part of our store staffing optimization efforts, we plan to also rebalance the level of technical skills in each store, ensuring our stores are staffed with technicians that have the appropriate skill level for the services needed.”

On Tuesday, Monro announced the appointments of Jerry Alessia as senior vice president of tire merchandising and Avi Dasgupta as vice president of information technology infrastructure and data architecture. Both hires are part of the company’s new Monro.Forward initiative.

Separately last week, Monro announced a collaboration with Amazon.com to provide tire installation services at Monro’s retail tire and automotive service centers throughout the Eastern U.S.

Monro’s tire installation services are now available to customers who purchase tires from Amazon.com and select the ship-to-store option across Monro’s 52 stores in the Greater Baltimore area. Following the initial launch, the collaboration will be expanded to provide the service at Monro’s nearly 1,200 retail locations in 27 states. The Amazon deal is non-exclusive.

“In line with our Monro.Forward strategy, this collaboration marks a major milestone of development of our omni channel presence and builds upon the success of our multiple preferred tire installer agreements,” Ponton said in Monro’s earnings call. “While still representing a small fraction of our business, our agreements with online retailers are a key component of our omni channel strategy.”

Ponton said roughly half of the online tire customers are new to the Monro brand. Historically Monro has experienced an average ticket of roughly $120 for online tire sales, compared with the company average ticket of more than $160.

“We have no reason to believe that the economics on the Amazon relationship will be dissimilar to what we’re currently experiencing with other online partners,” he said in the call.

Monro officials also increased full-year guidance. Based on current sales, business and economic trends, as well as acquisitions, Monro anticipates fiscal 2019 sales to be in the range of $1.18 billion to $1.21 billion. The company expects diluted earnings per share of $2.30 to $2.40, compared with $1.92 per share in fiscal 2018.

Monro will hold its annual meeting on Aug. 14, at which shareholders will vote to elect four directors and approve compensation for company executives. Under a 2017 employment agreement that runs through July 31, 2020, Ponton is paid a base salary of $550,000 and is eligible to earn an annual bonus of up to 150 percent of his base salary upon certain performance achievements.

The proxy statement notes that for fiscal 2018, the median income of all employees other than the CEO was $34,543, while the total compensation of the CEO was $5.9 million. John Van Heel served as CEO until Oct. 1.

Following a dip in share price to $63.25 on Friday, Monro stock (Nasdaq: MNRO) has rebounded, trading at $67.75 mid-week.

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