Monro 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.

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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