Monro Inc. has announced financial results for its second quarter ended Sept. 29, 2018.
Second Quarter Results
Sales for the second quarter increased 10.5 percent to $307.1 million, as compared to $278 million for the second quarter of 2018 (“fiscal 2018”). The total sales increase for the second quarter of $29.1 million was driven by a comparable store sales increase of 3.2 percent and sales from new stores of $19.9 million, including sales from recent acquisitions of $15.6 million. Comparable store sales increased approximately 12 percent for brakes, 3 percent for tires, were flat for both maintenance services and front end/shocks and decreased approximately 1 percent for alignments.
Net income for the second quarter of fiscal 2019 was $21.8 million, as compared to $17.3 million in the same period of the prior year. Diluted earnings per share for the second quarter of fiscal 2019 were 65 cents, including 2 cents of one-time costs related to Monro.Forward investments. This compares to diluted earnings per share of 52 cents in the second quarter of fiscal 2018, which included 1 cent of management transition costs, representing a 25 percent year-over-year increase. Diluted earnings per share also included 1 cent of net impact from Hurricane Florence in the second quarter of fiscal 2019, compared to 2 cents of net impact from Hurricane Irma in the second quarter of fiscal 2018. Net income for the second quarter of fiscal 2019 reflected an effective tax rate of 22.2 percent, as compared to 38.2 percent in the prior year period. The decrease in the effective tax rate was primarily related to a reduction in the federal income tax rate as a result of the enactment of the Tax Cuts and Jobs Act.
During the second quarter of fiscal 2019, the company opened 17 company-operated locations and closed three, ending the quarter with 1,178 company-operated stores and 97 franchised locations.
“We delivered another quarter of strong comparable store sales growth and robust earnings per share, driven by higher average ticket from improved in-store execution. Our sustained momentum reflects our relentless focus on driving operational excellence and delivering a consistent five-star experience to our customers. The execution of our Monro.Forward strategic initiatives continues to progress on schedule, and we are pleased with the key milestones we achieved during the quarter. In addition to the launch of our data-analytics based CRM platform, we rolled out our new websites and expanded our collaboration with Amazon, underscoring the progress we have made in building a true omni-channel presence,” said Brett Ponton, President and CEO.
Ponton continued, “As we enter the second half of the year, we believe the strength of our year-to-date performance, the acceleration in our comparable store sales, up approximately 7 percent month-to-date in fiscal October, and the continued traction of our strategic initiatives position us well to achieve the high-end of our comparable store sales guidance, assuming normal winter weather conditions. We also believe we are well positioned to achieve our diluted earnings per share guidance. Given the success of our Monro.Forward strategy, we would like to maintain flexibility to accelerate our investments in the second half of the fiscal year and therefore are leaving our previous diluted earnings per share guidance in place. Overall, we remain confident that our Monro.Forward initiatives coupled with our disciplined acquisition strategy will allow us to drive a sustainable platform for long-term growth and strong shareholder returns.”
First Six Months Results
For the current six-month period, sales increased 8.3 percent to $602.9 million from $556.5 million in the same period of the prior year. Comparable store sales increased 2.5 percent compared to 0.5 percent in the prior year period. Net income for the first six months of fiscal 2019 was $42.4 million, or $1.26 per diluted share, as compared to $34.9 million, or $1.05 per diluted share in the comparable period of fiscal 2018.
Acquisitions Update
The company also announced yesterday that it has signed a definitive agreement to acquire five retail locations in Ohio, filling in an existing market. These locations are expected to add approximately $5 million in annualized sales, representing a sales mix of 70 percent service and 30 percent tires. The acquisition is expected to close in the third quarter of fiscal 2019 and to be breakeven to diluted earnings per share in fiscal 2019.
The company also signed a definitive agreement to acquire 13 retail locations in the Southeast, filling in an existing market. These locations are expected to add approximately $12 million in annualized sales, representing a sales mix of 65 percent service and 35 percent tires. The acquisition is expected to close in the fourth quarter of fiscal 2019 and to be breakeven to diluted earnings per share in fiscal 2019.
The previously announced acquisition of seven stores, representing $8 million in annualized sales, has been delayed due to an extended due diligence period, and is now expected to close in the fourth quarter of fiscal 2019.
On a combined basis, acquisitions completed and announced to date in fiscal 2019 represent an expected total of $80 million in annualized sales.
Company Outlook
Based on current sales, business and economic trends, and recently announced and completed acquisitions, Monro now anticipates fiscal 2019 sales to be in the range of $1.185 billion to $1.215 billion, an increase of 5.1 percent to 7.7 percent as compared to fiscal 2018 sales. This compares to the previous sales guidance range of $1.18 billion to $1.21 billion. Fiscal 2019 sales guidance continues to assume a comparable store sales increase of 1 to 3 percent on a 52-week basis.
The company has reiterated its fiscal 2019 diluted earnings per share guidance range of $2.30 to $2.40. This guidance compares to diluted earnings per share of $1.92 in fiscal 2018. The earnings per share guidance is based on 33.6 million diluted weighted average shares outstanding.
