Sales at Monro Inc. for the first quarter of fiscal year 2021 reflect the effects of COVID-19, with sales in April, May and June dropping 22.1% compared to the previous year. Tires, which account for more than half of the company’s sales, were easily the best performing category, and they were down 14%.
Net income at Monro was down 86.8% — just shy of $3 million, compared to $22.6 million in 2019. Sales of $247 million this year were off by $70 million from the $317 million recorded a year ago.
Here’s how those sales broke down in the five major categories that Monro reports:
Tires: down 14%
Alignments: down 32%
Maintenance services: down 35%
Front end/shocks: down 36%
Brakes: down 41%
The company says importantly, monthly comparable store sales in each of these categories “improved sequentially throughout the quarter.” April was the low point, CEO and President Brett Ponton told investors. Same-store sales in April were down 41%, and with steady improvement each month since; Ponton said July comparable store sales are down about 12%.
“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," he said, including the company's "technology-based store staffing model and our tire category management and pricing system."
Monro officials "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.
“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. 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.”
Rebranding, Acquisitions to Resume
In addition to resuming the company’s rebranding efforts, Monro hopes to update anywhere from 60 to 120 stores in this next quarter, spending $30 million to $50 million — the company is also re-activating its acquisition activities. Both efforts were paused in recent months due to the uncertainties and difficulties associated with COVID-19.
Ponton said Monro has a robust pipeline of acquisition opportunities to consider — “as robust as I've seen at my tenure at Monro.” He thinks government programs such as the Paycheck Protection Program helped some independent tire dealers through the crisis, but other conditions sustain the opportunities for Monro — namely that plenty of tire dealers don’t have second generations in place who willing or want to take over the business.
Monro says its cash on hand and equivalents of about $145 million, plus a credit line of $255 million, will help it navigate the current COVID-19 environment. That money also could help it buy other tire dealerships.
Monro noted that it paid down more than $240 million of bank debt during the quarter, leaving it with net bank debt of $179 million as of June 2020.
