Monro reports Q3 adjusted EPS 39c, consensus 39c

Reports Q3 revenue $317.65M, consensus $324.22M. Q3 comparable store sales decreased 6.1%. “Our third quarter comparable store sales decline of approximately 6% was due to milder weather as well as a pressured low-to-middle income consumer that continued to defer purchases in our high-ticket tire category. This was clearly evidenced by an industry-wide slowdown in tire unit sales in the regions of the country where a vast majority of our store footprint is concentrated. This led to pressured store traffic, which was not supportive to sales of our higher-margin service categories in the quarter. While our tire units were down approximately 14%, leveraging the strength of our manufacturer-funded promotions allowed us to optimize our assortment for improved tire profitability in the quarter. And, while continued consumer trade down dynamics led to a higher proportion of lower-margin opening price point tires within overall industry unit sales, we remained focused on maintaining a healthy mix of opening price point tires in the quarter. Encouragingly, based on retail sell-out data from Torqata, a subsidiary of American Tire Distributors, our tire market share remained broadly in-line with the overall market in our higher-margin tiers. We continued to mitigate the impact of this industry-wide slowdown with actions to reduce non-productive labor costs, including overtime hours in our stores. Despite a tough macro-economic environment, the resiliency of our business model and the actions that we’ve taken allowed us to expand gross margin in the quarter. While our preliminary comparable store sales for fiscal January are down approximately 6% due to softness in the first half of the month, comparable store sales have accelerated materially in the last two weeks with the return of normal seasonal weather. Given the current pressures on the consumer, we no longer expect to grow full-year sales, but we do expect diluted earnings per share to be higher versus prior year. This will be driven by actions we’ve taken to successfully re-position our cost structure as well as expanding our gross margin through properly training our Teammates to maximize their productivity and optimizing our tire assortment for improved profitability. We will continue to remain relentlessly focused on improving our 300 small or underperforming stores, maintaining a balanced approach between our tire and service categories with competitive pricing to drive store traffic and continuously improving our customer experience. 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.