• Revenue: Sales decreased 4.9% to $295 million in the fourth quarter.
• Comparable Store Sales: Increased 2.8% but decreased 3.6% on an adjusted for days basis.
• Gross Margin: Decreased by 250 basis points compared to the prior year.
• Operating Expenses: $121.1 million or 41.1% of sales, up from $99.7 million or 32.2% of sales in the prior year.
• Operating Loss: $23.8 million or negative 8.1% of sales.
• Net Loss: $21.3 million compared to net income of $3.7 million in the prior year.
• Diluted Loss Per Share: $0.72 compared to diluted earnings per share of $0.12 in the prior year.
• Adjusted Diluted Loss Per Share: $0.09 compared to adjusted diluted earnings per share of $0.21 in the prior year.
• Cash from Operations: $132 million, including $43 million of working capital reductions.
• Store Closures: Plan to close 145 underperforming stores, impacting approximately 5% of total sales.
• Capital Expenditures: $26 million invested.
• Net Bank Debt: $40 million with availability under the credit facility of approximately $509 million.

• Warning! GuruFocus has detected 7 Warning Signs with MNRO.

Release Date: May 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Monro Inc (NASDAQ:MNRO) has shown impressive durability through business cycles, positioning itself as a leading player in a highly fragmented industry.
• The company benefits from significant scale, providing competitive advantages and enabling critical investments in business, people, and technology.
• Industry fundamentals remain strong, with continued growth in vehicles on the road and a shift from do-it-yourself to do-it-for-me services.
• Monro Inc (NASDAQ:MNRO) is a consistent cash generator with ample liquidity, a solid balance sheet, and low leverage.
• The company has identified key areas for improvement, including closing unprofitable stores and enhancing customer experience, which are expected to drive profitability and shareholder returns.

Negative Points

• Monro Inc (NASDAQ:MNRO) plans to close 145 underperforming stores, which, while improving profitability, will reduce total sales by approximately $45 million in fiscal 2026.
• Gross margin decreased by 250 basis points due to higher material costs, wage inflation, and self-funded promotions.
• The company experienced a net loss of $21.3 million in the fourth quarter, compared to net income in the same period last year.
• Store traffic has declined over the past three fiscal years, driven by suboptimal marketing and a decline in the quality and retention of new customers.
• Monro Inc (NASDAQ:MNRO) faces uncertainties related to tariffs, which are expected to drive cost increases across major product categories, potentially impacting profitability.

Q & A Highlights

Q: Can you provide more details on the impact of self-funded promotions and wage inflation on gross margins? A: Brian D'Ambrosia, CFO, explained that the gross margin impact from self-funded promotions primarily involves tire promotions, including Drive card promotions and everyday offers like buy three, get one free. These promotions have been consistent throughout FY25, impacting year-over-year gross margins. The gross margins are expected to remain pressured due to baseline cost increases and potential tariff impacts, offset by closing underperforming stores and benefits from the improvement plan.

Q: Who are the higher value target customers, and what marketing strategies are being used to convert them? A: Peter Fitzsimmons, CEO, stated that Monro is focusing on repeat customers who value a range of services. The company is reallocating marketing investments to target these high-value customers, using insights from the AlixPartners team to refine marketing and advertising strategies. This approach aims to attract incremental customer traffic by targeting preferred customer profiles.

Q: Can you break down the 250-basis-point decline in gross margin? A: Brian D'Ambrosia, CFO, detailed that 160 basis points of the decline were due to material costs, including trade-down within the tire category and self-funded promotions. Technician labor costs, driven by wage inflation, accounted for 80 basis points, with the remainder due to deleverage on fixed occupancy costs from the loss of an extra week in the prior year.

Q: What are the dynamics between traffic and ticket in the quarter, and what are the expectations for improvements in '26? A: Brian D'Ambrosia, CFO, noted that traffic was down low-single digits, while ticket was up mid-single digits, resulting in an adjusted comp of about 2.8%. Positive store traffic was observed in March, with continued improvement in April and May. The company expects better traffic trends to support comps in fiscal 2026.

Q: Has there been any change in the relationship with ATD following the final payment of the earnout? A: Brian D'Ambrosia, CFO, confirmed that there have been no material changes in the relationship with ATD. Some clarifications were made regarding service levels due to current operating environments, but these do not materially impact the business or the relationship with ATD.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.