Monro reports Q1 adjusted EPS 31c, consensus 37c

Reports Q1 revenue $326.97M, consensus $332.39M. Q1 comparable sales increased 0.5%. Comparable store sales increased approximately 18% for batteries, 3% for maintenance services and 1% for tires compared to the prior year period. Comparable store sales decreased approximately 2% for brakes and alignments and 9% for front end/shocks. “Our first quarter comparable store sales growth of less than 1% fell short of our expectations. The shortfall was primarily driven by lower-than-expected sales due to customer deferrals in some of our key service categories in June. Broad-based inflationary pressures have persisted such that the consumer slowed their purchases of some of our higher-ticket service categories. While our comps in the quarter fell short of expectations, customer traffic counts were in-line with our expectations and remained consistent with improving traffic trends in the back half of fiscal 2023. Tire margins returned to solid footing, but our overall gross margin in the quarter was impacted by a lower-sales mix of our high-margin service categories. This resulted in higher material costs and continued labor cost pressures as a percentage of sales, relative to our expectations. As a result, we took swift actions to reduce non-productive labor costs, including overtime hours in our stores, which allowed us to preserve margins and profitability. While we will likely need to see an improvement in the overall health of the consumer before we can fully capitalize on longer-term industry tailwinds, we will remain relentlessly focused on achieving our mid-single-digit comp store sales expectations through accelerating growth in our 300 small or underperforming stores, maintaining a balanced approach between tire and service categories with competitive pricing to drive store traffic and continuously improving our customer experience. Encouragingly, our preliminary comp store sales for fiscal July are up approximately 1%, which is a positive rebound off of the sales trends that we saw in fiscal June and a step in the right direction. We will also strive to expand our gross margins through appropriate staffing and properly training our Teammates to maximize their productivity. Given the current pressures on the consumer, we are also laser focused on maximizing profitability through prudent cost control, which includes right sizing our fixed costs and rationalizing unproductive labor. While we take these actions, we will not cut productive labor at the sacrifice of our standards and to the detriment of our long-term service model. In addition, we will continue to create cash by optimizing inventory and leveraging the strength of our vendor partners for better availability, quality and cost of parts and tires in our stores,” said Mike Broderick, president and CEO.