ITASCA, Ill. — Midas Inc. reported a net loss of $(0.2) million, or $(2 cents) per diluted share, for the fourth quarter ended Jan. 2, compared to net income of $2.7 million, or 20 cents per diluted share, in the prior year.
The company said fourth quarter 2009 results were negatively affected by business transformation charges of $2.9 million, or $(12 cents) per diluted share.
Total sales and revenues were $45.7 million for the fourth quarter and $182.8 million for the full year, compared to $46.7 million and $187.4 million in 2008.
Retail Sales
“Retail sales in 2009 for Midas were challenging, although we saw sequential improvement in the second half,” said Alan Feldman, Midas’ chairman and chief executive officer. “Comparable shop sales in U.S. Midas shops increased by 1.4 percent in the fourth quarter, after being down by 1.1 percent in the third quarter and 3 percent in the first half.
“Our growth in U.S. Midas shop traffic also continues to accelerate,” he said. “Average daily car count per shop in the U.S. was up 20 percent in the fourth quarter after growth of 17 percent in the third quarter and 11 percent in the second quarter.”
Feldman said that Midas’ marketing strategy in 2009 was to build shop traffic with value-priced oil changes, to alert customers to additional service needs on their vehicles using detailed courtesy checks and to begin building long-term relationships with these new customers.
“The growth in shop traffic and in our oil change business confirmed that we were successful in attracting new customers to Midas,” Feldman said.
“Midas’ comparable shop oil change business increased by 28 percent during the quarter and was up 27 percent for the year. Our focus on tires also is paying off, with tire sales in U.S. Midas shops up by 11 percent in the fourth quarter and 8 percent for the year,” he said.
Feldman added that trends in the brake business at Midas’ U.S. shops also are improving.
“Brake sales were down 5.4 percent for the year,” he said. “We started with a decline of 7.2 percent in the first quarter of 2009 and saw the declines lessen every quarter. Brake sales were down by only 3.5 percent in the fourth quarter.”
Feldman attributed the improvement in brakes to strengthening consumer spending, as well as improved courtesy check inspections on the growing number of vehicles coming to Midas shops.
“We have begun to roll out new training programs designed to ensure that shop employees are routinely inspecting every vehicle coming into their shops, which will lead to increases in sales of brakes and other required services,” Feldman said.
Fourth quarter and full-year 2009 results
“During 2009, we added 10 Midas company shops, re-franchised four shops and closed four,” Feldman said. “We will continue aggressive efforts to sell Midas company-operated shop locations to current and new franchisees, including the 22 shops we acquired in January 2010 in northern California.”
Revenues from replacement part sales and product royalties were $7.8 million for the fourth quarter and $25.8 million for the year, compared to $8.5 million for the fourth quarter and $29.2 million for all of 2008. The fourth quarter decline was the result of lower equipment sales to franchisees as well as a transition to direct dealer billing from Shell Oil on oil purchases. The full year decline was due to these factors as well as a decline in the sale of branded tires to franchisees.
For the full-year 2009, the company reported net income of $2.6 million, or 19 cents per diluted share, compared to $7.8 million, or 56 cents per diluted share, in 2008.
SpeeDee Co-Brand Update
The company continues to expand its co-brand program based upon the sales growth at the initial test shops. The four franchised SpeeDee shops in northern California that added Midas services in 2008 continue to show strong sales growth and were up eight percent for the fourth quarter. The four company-operated Midas shops in the Chicago area that added SpeeDee services in the first quarter of 2009 were also up eight percent, while the 10 company-operated Midas shops in San Diego that added SpeeDee were up 12 percent in the fourth quarter.
The company extended the program to Midas franchisees in the fourth quarter and three Midas franchisees added SpeeDee services to their Midas shops. These locations have experienced the same doubling of car counts that were experienced by the Midas shops in Chicago and San Diego upon co-branding. There were a total of 23 co-branded locations at the end of 2009.
“We are encouraged by the sales increases at these co-branded shops and expect to co-brand approximately 25 additional locations during 2010,” Feldman said.
2010 growth opportunities
“We will continue on course in 2010, with programs to grow the company’s revenues and profitability by building retail sales at Midas and SpeeDee shops and by careful management of our costs,” Feldman said. “I am confident that we have the strategies in place to take advantage of growth in the service aftermarket as the average age of the U.S. vehicle population of 240 million cars and light trucks continues to increase toward the 10-year mark.”
Feldman said that a renewed focus on in-shop selling and customer service execution in Midas shops is beginning to show results.
“This effort began last summer in the Northeast region, which recorded a comparable shop sales increase of five percent in the fourth quarter with a 2.5 percent improvement in brake sales,” Feldman said.
Feldman said that the company should see increased retail sales as the training for the improved in-shop customer service execution rolls out throughout the U.S. and Canada during 2010.
“Importantly, the sales improvement we reported for the fourth quarter has continued into 2010,” Feldman said. “For the first two months of the new year, Midas’ U.S. comparable shop sales have increased by one percent despite harsh weather in certain parts of the country.”
Feldman said the company will also continue its efforts to co-brand Midas and SpeeDee repairs and services in another 25 locations, to transition at least 100 Midas shops to new owners and to efficiently manage its corporate expenses.
