Monro (MNRO) 24 Jan 242024 Q3 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to Monro Inc.'s Earnings Conference Call for the Third Quarter of Fiscal 2024. [Operator Instructions]. Later, we will conduct a question-and-answer session and instructions will follow at that time. [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 at Monro. ahead. go Please

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

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

include information today's President not discussion be Monro's comparable GAAP and that, in our Chief I'd on measures. of Officer, comparable earnings for will included to today's be statements such supplement Executive measures measures a intended management's call, Broderick. release. With financial substitutes of certain call and the of Reconciliations GAAP to which like part as presentation are over the and to Michael Additionally, turn supplemental non-GAAP to

the by store our that consumer majority income of industry-wide purchases continue in an as where was to This is performance reflected weather I'd due middle slowdown well evidenced clearly Thank in walking concentrated. a our our spend footprint this to the quarter the of defer you, to milder tire regions as in first which like our through high-ticket country sales of everyone. results call was were a vast Felix, line tire good part category. This morning, unit low to pressured that top challenged. morning, and third

to our margin gross of a in the deliver continued expand business to to the us the others allowed impact to reduce resiliency industry and taken per diluted an our this slowdown I'll of labor costs. Despite this mitigate in we've we actions with our despite the We model also that discuss fiscal and tough quarter. that actions experiencing. the plans consumer-related macroeconomic environment, are earnings improvement year some of share headwinds in nonproductive our

teammates of get like I our our Before the serving and all I'd customers. needs started, thank for to recognize

our Now quarter results. turning to third

comparable underperforming Comp store the quarter. from were Our third prior our period. the quarter sales stores XXX in sales smaller overall our comp X% with declined consistent approximately in store year

tire industry-wide I consumer challenged of tire store to an the in in traffic, higher-margin pressured continue which earlier, categories in As to be deferrals the as stated by sales. not by unit sales slowdown quarter. of evidenced service supportive sales to quarter our our results purchases led was This

tiers. our strength data the assortment proportion ATD, leveraging units trade continued improved profitability price point And lower-margin tire focused opening remained in unit while funded led share us on optimize of within on our for our manufacturer our subsidiary of Torqata, higher-margin overall tires point based allowed healthy line in down the quarter. Encouragingly, opening overall industry tires from sales tire we our market remained higher While promotions of market broadly a sellout quarter. XX%, the a mix price dynamics in a tire to the to were in with maintaining approximately down retail of consumer

even allowed actions labor us our stores, on XX% in to margin in volumes. which down industry-wide lower this costs We including sales continue This tires gross were mitigate hours slowdown with overtime year-over-year. nonproductive reduce to expand to

We manage labor will expense maximize and costs profitability. continue to closely our to

this year choppy to share our earnings diluted concluding per in plans deliver a Now improvement consumer despite an environment. our fiscal with

the While due our with of last preliminary in X% have half materially return month, the the weather. Comp store Comps the accelerated sales normal for first are in down fiscal softness seasonal X January to weeks of approximately

We compares easier grow consumer, given expect year pressures no prior longer the we year on March. and in have sales. current some February to But the full

we've versus full our expect our for structure successfully reposition be do assortment productivity year. our their per teammates driven as higher we tire to by properly However, margin earnings will our expanding prior profitability. well to optimizing cost and training diluted maximize as actions share taken be This gross through year to improved

continue approach between to stores, store and balanced pricing focused categories service improving XXX a improving our to will remain underperforming our our on drive maintaining traffic, relentlessly experience. competitive or We and continuously with customer tire small

of Brian, our positioned optimizing will regarding pre-COVID overview the levels XXXX. Monro's quality we for closing, parts color stores. In of Brian? in we that double-digit third addition, remain will margins tires to our margins In additional challenges well by macroeconomic business quarter financial on and strength back partners a leveraging posed with and the operating inventory to despite to provide continue we environment, are cost strong confident term. With continues the longer fiscal better path availability call an and cash over create gross I'll remainder and to the by vendor position the be current our and over turn who restore now of of to our performance, that, the

Thank and good morning, everyone. you, Mike,

basis of tire resulting costs new stores due were $X.X share, in which compared a Turning effective compared regarding this X.X% and to measure, earnings fiscal Slide our third is higher morning's million compared diluted for compared to quarter XX.X%, tax $X.XX XX.X% This $XX due earnings approximately last share in to $XXX.X of prior from in is the X.X% third year distribution year declined average the $X.XX, year, and The EPS to or to the of sales presentation, further approximately effective increased sales quarter and or million was $XX.X income sales $X.XX is same was partially excluded Sales third in an weighted to period the and lower year-over-year which period. Net compared technician as to costs due to earnings million of sales adjusted the or $X compared which to to percentage expense both period. primarily was sales. Comparable $XX.X from or or tax sales. Total rate $XX.X million year the X. labor $X.XX to by a XXX as the $XX.X a primarily decreased increased details principally was occupancy operating for million a our the prior items release expenses material and margin of sales XX.X% decreased as million year-over-year offset of years. of income same $XX.X million percentage points million same press of period compared prior increase earnings this year. reconciliation percentage in a lower diluted million quarter Gross $X.X debt. million million X.X% diluted earnings principally Slide decrease in XX.X% in non-GAAP $X or third sales an last as of as to of to quarter was costs to Diluted period. Net last in on comparable per tax store prior were Adjusted rate the was lower sales. This of sales. interest expense store approximately fiscal in compared XXXX. Please $X to million. unit the adjusted share decreased the in per X.X% was to sales year. of as period X in for year. per of refer Income Operating

financial third we highlighted capital of a to cash This We to $XXX conversion operations Slide As of working period. reduced including compared X of in prior XXXX, first year cycle million XX solid at $XX the the has months our approximately X, days million from on end quarter reductions. the during cash generated position. the maintain by continue fiscal very

Our fiscal capital the and and XXX% the divestiture for $XX dividends. AP $XX financing in invested million the ratio million versus third quarter principal $XX million to leases of we distributed expenditures, received at of spent in in million We at end and inventory end payments XXXX. proceeds $XX was XXX% in

ratio Lastly, stock. significant of We've the repurchases the of repurchase and cash of capital million our fiscal share months by X under the which bank to and million common reduce cash $XX debt of first quarter, repurchase stock of common $XXX equivalents had up million bank third end a net invested debt-to-EBITDA were the approximately XXXX. At our $XX to our $XX during million of million, company's $XX used us authorizes we cash X.Xx. flow of to program,

fiscal to are we While we're not providing modeling. your providing guidance for remainder of XXXX, assist color in the

We expect inclusive in year week our lower fourth extra full quarter. of year-over-year an sales,

drive improvements offset labor Total partially to inflation. to well as percentage sales in costs to base direct sales higher our lower a volume. as productivity from will by optimization year-over-year which year-over-year our departmental margin inflation expect through wage due and the of of to tire improvements our be mix increases are and pricing support in actions, as expected We operating store be and gross investments, continued expenses impact

fiscal be XXXX. should for Our tax rate approximately XX%

to we $XX capital in our expect Regarding spend million fiscal million XXXX. approximately $XX expenditures, to

We our cash reductions. operating also expect continue capital flow driven working continued to improving by

share approach for that, of I increase value-enhancing Mike And over acquisitions closing turn as through capital. to opportunistically to call to returning is will and shareholders repurchases now expected capital dividends on meaningfully remarks. completing Our the with back our invested return well some balanced as

cash. remain initiatives margins Brian. improve laser-focused sales, expand our to Thanks, and on We create

will have long-term it to our to for positioned creation still and operator growth we our questions. to value we shareholders. do, With turn Although that, strategy now execute deliver I the work are over important for well

[Operator Instructions].

from David from comes question first Wells Fargo. Lantz Our

was was lot. the improved first I pretty challenging, if talk could about quarter-to-date just the half has curious January but like of bit sounds trends more second So a comp It in detail. you a half

about So I was that. just curious

Mike. David, is this

give we're to you on Just seeing. what clarity

two were the a driven weeks in very The first holiday. soft, by shift

gained Monday. lost basically more but X business Sundays I Mondays, X do I on important So very much and

that was soft it a And then and story. contributed story tire the weather of to comp. a a just So continue-on

happened last month, the in back, the weather normalized. the As which X as everything of weeks came soon

Our we it turned And was first the very difference tire business X a significant second the and weeks. weeks our between in different X a the position. business came back, characterize way

Got it. quarter. margins the a That's helpful. And were then standout gross in

curious kind to just that could lever reduce could talk still many how of be? And you structural you what -- I hours So overtime through much if there? was how have what's and

again. is This Sure. Mike

higher I I controlling we've decisions down -- bringing around we Just tire, made over to to our that as was the payroll. When cap in tire over you at demands. the when so it. service X invested of through because order categories our to Number to That the contributed the partly did profitable did Obviously, And X the that least, last margins, meet pay job decline. great is contributed our we not team at time material for a about life but was we've tire better year-over-year, attention our look you want talked customer. really the X, were in really the sequentially, assortment, tire in sales. team margin, actually And a when Tier at is customer look to actually, so look the never of a some -- but nice time, change really that drive to we our in past. more job

overtime, their ultimately, talked we're on in our people being I'll in about is I our payroll, demand and fair we've sure wages customers making served. invest to are meet technicians what invest this and focused order past. that. in But continue earning the our So I'll nonproductive are do to in

sales. as XX we and comp year-over-year. technician a some basis point benefit see did XX benefit, out And the that to technician XXX points percent for Mike cost of -- the point labor That margin give points explained. basis a related to to was costs lower basis Mike to costs Just The sales numbers nets they occupancy up the in follow reasons on as improvement. the headwind us described. material to delevered The basis XXX distribution quarter about that put improved pieces on

is next Jefferies. Bret question Our at Jordan from

count car Could in composition you out break the of comp versus price?

When it at was X%. our down look overall was sales price Sure. -- X%. up Price we car was average count, up

out good our in ticket X%. down Let I much me into was most -- call different, back feel our expenses is confident our up down this do basically was flat. tire, team go mix I much last job behind again, now in tire I ran X% look January. When look to The that X% have right down to controlling contributing the business, it units, going if margins On service and we P&L average change in different would want we OPP at that deeper ticket. moving started that. were Once conversation XX% direction. of doing a us. that we And we

we've lapped Now conversation again. where normal to this confident I'm feel the looking and we year. around we thing a get assortment, forward to normal a back our I at tire customer get more more environment growing

to squeeze sort in of the Okay. what's tank left far sheet? cash as as balance And from then working incremental off that the contribution capital,

on of we're the still there's call, talked but opportunities. Yes. last later Bret, about that, the we innings in as

cash be only don't give supported there's Certainly benefit capital profit improvements. also expect think the continue not to come. of to will by we any growth, So working to believe additional not that that that but our working and capital back flow --

the comps? Okay. monthly can give you And Brian, us

December down in X.X% X.X% January down down X%. month-to-date the X.X% October, preliminary down then November, and Sure. in in

Our next Oppenheimer. from Brian is question Nagel at

no the Comp purchases first And your my help question of a follow-up. question that regard called so? winter, the upon improving, the again confidence that to is get there impact maybe have look, overall you weather. for of But sluggish of could signals you the out confidence indication say. you actual mean, understand a I I to But to secret starting some less so guess starting with behind warm is consumer impact consumer. I you it's that improve. us bit I we're also, with maybe probably sales? then to I getting the start had mean we -- better to the seeing that are a this some out is noise, is maybe mean delayed all are consumer so just

me let Mike. Brian, Yes. -- is this

want were the wish I it a did the changed a talked we sort I event. tire quarter, -- made say we've past, the different a weekly when which don't that about looking me result. to in had I of for dramatically. come, in Let give weather would third cadence. But business, we it it

I doing to trading at weather we're what significant to look what we've the tires seeing a that in consumer like tires tire So the buy now. about just used talked customers down still and past, did contribute and change. X tire one would to are that X

for there's tire. is just replacing consumer these high-ticket that be one be still example So see I would say to differently, consumer that they And I we the are a should is anything rough minimum that I'm consumer using X not a in the probably tires deferral cycle. as just able should patch. see tires. seeing replacing until an I say, to hey, there And with something

Imbro next Stephens at question Our Inc. is from Daniel

you Still share in share Joe Daniel. higher-margin in price Enderlin movement some opening seen for movement you seems that like pace Commentary Have says on of those tiers. point. release maintain is slow? the in This the the

look we price Well, just but just in point. the last knew going something give the the to customer to on, declining. industry, tire customer factored going we now, The the definitely years in made That didn't have not an share through at up that X. that forecasted. When X market But we in I without behavior to would was with be we we did or price Tier X into in right and mid-single is the here units thing decision factor and January, units decisions as assortment. overall I were that question, Tier moved clear, was That industry we is one prior lose see that, opening the X we never were were with down digits. not

I'm business right by back. to now, actually the looking consumer again, now, So say right back there the tire around tough going is shared a and to that would I forward environment all. Once it's very environment coming

That's Got it. helpful.

those more for could you on some did your quarter? follow-up, as provide underperforming Just stores expectations color a the versus how XXX

they additional quarters my boxes. I transactions missed was of the They tires And There transactions those XXX continue with were low-volume that on or successful, fell my expectations, on consistent very X of sales we to expectations. profitable actually stores. a of about would I we're performance in with in met one chain. driving expectations. prior focus extremely the lot in of X/X Versus those rest say variability the talked stores. comp expectations could some these X/X and X/X, have significantly short change through having

of P&L Just variable how is. and sales kind stores, illustrate these some really to of performance

from a at Our question next Bret is follow-up Jordan Jefferies.

a talk a long an group. announcement supply in about just it think did the -- deal X-step big it on about is Or with with is impact or the part I have you Does deal the of already material not ago, incremental made an you supply too you impact some margin? you any part guys? ones Could that? have

trying we margin call just better did talk a out. this say to would customers. And make deal. to I I parts I would in serve so be no nothing team can It gives would another in their something -- it's but quarter would option There's look our say there's that about. there's for case incremental, they're they

cost then guess detail little And comment. a I more reduction bit the labor Okay. on

cost the basis an absolute big labor it of side headcount? you in you of are something said what benefit. points or Is labor pull think reduction Sort levers the in I on in XX hours was it reduction the can things? just

really bit that we had what so we that considering hours And a hours when were we did very more did -- really tightly, managed flexible reduced just customers that the we sales come just the both. but is we the a ultimately, restricted through the did of tight But and did we environment. could hours we we managed we less that we into little way people, just stores. importantly, really schedule. so our Yes,

people. couple they're of is manage tools, great years to ago, technicians. to managing team in job say, is cost, a it back a we allow would to the Going invested and from scheduling our a tools better us I doing which perspective, adapting Monro biggest our our And

Instructions]. [Operator

line. the on questions further no have We

Michael So I to call will back hand the remarks. for Broderick closing

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

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

This all very much concludes call. the conference joining. Thank for you

You may lines. now disconnect your