Monro Inc. has announced financial results for its third quarter ended Dec. 28, 2019.
Sales for the third quarter of the fiscal year ending March 28, 2020 (“fiscal 2020”) increased 6.2% to $329.3 million, as compared to $310.1 million for the third quarter of the fiscal year ended March 30, 2019 (“fiscal 2019”). The total sales increase for the third quarter of $19.2 million was driven by sales from new stores of $22.7 million, including sales from recent acquisitions of $20.7 million, partially offset by a comparable store sales decrease of 0.9%. Comparable store sales were flat for maintenance services and decreased approximately 1% for tires and front end/shocks and approximately 3% for brakes and alignments.
Operating income for the third quarter of fiscal 2020 was $31.6 million, or 9.6% of sales, as compared to $30.7 million, or 9.9% of sales, in the prior year period.
Net income for the third quarter of fiscal 2020 was $18.9 million, as compared to $20.5 million in the same period of the prior year. Diluted earnings per share for the third quarter of fiscal 2020 were 56 cents, compared to diluted earnings per share of 61 cents in the third quarter of fiscal 2019. Net income for the third quarter of fiscal 2020 reflects an effective tax rate of 24.1%, as compared to 15.3% in the prior year period, which reflected a one-time income tax benefit.
During the third quarter of fiscal 2020, the Company added 27 company-operated stores, ending the quarter with 1,289 company-operated stores and 99 franchised locations.
“Following solid performance in October and early November, mild weather in late November and December negatively impacted our top-line. These conditions have continued into January, and given these dynamics, we are adjusting our fiscal 2020 same-store-sales and earnings per diluted share guidance ranges. While we are not satisfied with our financial results, we remain confident in our path forward, though as we have said before, we know it will not be linear,” said Brett Ponton, president and CEO.
Ponton continued, “We are focused on the elements within our business that we can control and made great progress on our strategic transformation this quarter. We continued rolling out our store refresh program and are pleased with the sustained results. We look forward to building upon this momentum as we further expand this initiative across our store base, which combined with our other strategic initiatives, will drive a consistent, 5-star experience for all of our customers. We believe we are well positioned to deliver sustainable, long-term value for our shareholders and are excited to capitalize on the significant opportunities ahead.”
First Nine Months Results
For the current nine-month period, sales increased 6.3% to a record $970.5 million from $913 million in the prior year period. Comparable store sales were down 0.1% compared to a positive 2.4% in the prior year period. Gross margin for the nine-month period was 38.6% of sales, compared to 38.9% in the prior year period. Operating income was 10.4% of sales, compared to 10.8% in the prior year period.
Net income for the first nine months of fiscal 2020 was $61.8 million, or $1.82 per diluted share, as compared to $62.9 million, or $1.87 per diluted share in the comparable period of fiscal 2019. Adjusted diluted earnings per share, a non-GAAP measure, in the first nine months of fiscal 2020 were $1.91, which excluded 6 cents of costs related to Monro.Forward initiatives and 3 cents related to acquisition due diligence and integration. This compares to adjusted diluted earnings per share of $1.88 in the first nine months of fiscal 2019, which excluded 5 cents of costs related to Monro.Forward initiatives, 1 cent of nonrecurring corporate and field management realignment costs, 1 cent of costs related to acquisition due diligence and integration and a 6-cent benefit from a one-time income tax adjustment.
The company completed the previously announced acquisition of 18 stores, including 14 in Nevada and four in Idaho, both of which are new states for Monro. These locations are expected to add approximately $20 million in annualized sales, representing a sales mix of 75% service and 25% tires. The company also completed the previously announced acquisitions of nine stores in California, expanding our presence in a recently entered state. These locations are expected to add approximately $25 million in annualized sales, representing a sales mix of 55% service and 45% tires. These acquisitions are expected to be dilutive to diluted earnings per share in fiscal 2020.
On a combined basis, acquisitions completed in fiscal 2020 represent an expected total of $120 million in annualized sales.
Based on current sales, business and economic trends, and recently completed acquisitions, the company now anticipates fiscal 2020 sales to be in the range of $1.275 billion to $1.290 billion, an increase of 6.2% to 7.5% as compared to fiscal 2019 sales, versus the previous range of $1.295 billion to $1.315 billion. In light of year-to-date trends, comparable store sales guidance for fiscal 2020 has been revised to be an anticipated decrease of 1% to flat compared to the previous guidance of an increase of 1% to 2%.
Monro now anticipates its fiscal 2020 diluted earnings per share to be in the range of $2.25 to $2.35, compared to the previous range of $2.45 to $2.55. This guidance compares to diluted earnings per share of $2.37 in fiscal 2019. On an adjusted basis, which is a non-GAAP measure, the company expects diluted earnings per share to be in the range of $2.35 to $2.45, which excludes Monro.Forward initiative costs and acquisition due diligence and integration costs. This compares to adjusted diluted earnings per share of $2.39 in fiscal 2019, which excluded Monro.Forward initiative costs, nonrecurring corporate and field management realignment costs, acquisition due diligence and integration costs and benefit from a one-time income tax adjustment.