Monro Muffler Brake has announced financial results for its second quarter ended Sept. 24, 2016.
Sales for the second quarter of fiscal 2017 increased 3.9 percent to $248.6 million, as compared to $239.2 million for the second quarter of fiscal 2016. The company said the total sales increase for the second quarter of $9.4 million was due to an increase in sales from new stores of $22.3 million, including sales from recently acquired stores of $20.1 million, partially offset by a comparable store sales decrease of 4.3 percent, versus an increase of 2.1 percent in the prior year. Comparable store sales were flat for tires, but declined approximately 2 percent for maintenance services, 6 percent for alignments, 13 percent for brakes and 13 percent for front end/shocks.
Operating income was $31.9 million, or 12.8 percent of sales, as compared to $34.1 million, or 14.3 percent of sales in the prior year period. Interest expense was $4.5 million as compared to $3.8 million for the second quarter of fiscal 2016.
Net income for the second quarter was $17.5 million, as compared to $18.9 million in the same period of the prior year. Diluted earnings per share for the quarter were 53 cents, within the company’s previously announced guidance range of 53 to 58 cents. This compares to diluted earnings per share of 57 cents in the second quarter of fiscal 2016. Net income for the second quarter of fiscal 2017 reflects an effective tax rate of 36.3 percent, as compared to 38 percent for the prior year period.
Monro opened 36 company-operated locations and closed three company-operated locations during the second quarter, ending the quarter with 1,097 company-operated stores and 131 franchised Car-X stores. The new stores include the acquisition of 26 Clark Tire retail and commercial tire and service locations, as well as 10 new greenfield locations.
John Van Heel, president and CEO, stated, “Despite the difficult operating environment, our bottom-line focus, diligent cost control and successful integration of our recent acquisitions allowed us to deliver sales and earnings within our guidance range. While we are not satisfied with our comparable store sales results, we did see incremental improvement as we moved through the quarter, with the month of September down 2.6 percent. Importantly, the disparity in top-line trends between our Northern and Southern markets narrowed in the second quarter, with continued positive comparable store sales in the South and improved trends in the North. This was supported by stronger tire sales as we moved through the quarter, driven by higher tire units, ending the quarter with an increase of 3 percent in comparable tire sales in the month of September. October month-to-date comparable store sales are down approximately 3 percent versus an increase of 3.7 percent in the same period during the prior year, with Hurricane Matthew negatively impacting this year by approximately 1 percent.”
For the six-month period, sales increased 2.1 percent to $485.5 million from $475.7 million in the same period of the prior year. Comparable store sales decreased 5.6 percent and the operating margin was 13 percent of sales versus 14.2 percent in the prior year period. Gross margin for the first six months was 40.8 percent of sales versus 42.1 percent in the prior year period, but 42.3 percent in the current year on a comparable store basis. Net income for the first six months of fiscal 2017 was $34.3 million, or $1.03 per diluted share, as compared to $37.7 million, or $1.14 per diluted share in the comparable period of fiscal 2016.
Company Outlook
Based on current visibility, business and economic trends, and recently completed acquisitions, the company now anticipates fiscal 2017 sales to be in the range of $1.03 billion to $1.04 billion versus the previous guidance range of $1 billion to $1.03 billion. Fiscal 2017 sales guidance assumes a comparable store sales decline in the range of 2.5 percent to 1.5 percent, as compared to prior guidance of a decline of 2 percent to flat. As a result of its revised comparable store sales guidance and expected additional costs related to acquisitions, the company also adjusted its fiscal 2017 diluted earnings per share expectation to the range of $2 to $2.10 from the previous guidance of $2.05 to $2.20, as compared to $2 in fiscal 2016. This estimate is based on 33.4 million weighted diluted average shares outstanding.
For the third quarter of fiscal 2017, the company anticipates sales to be in the range of $280 million to $285 million and comparable store sales to increase 1 percent to 2.5 percent, compared to a decrease of 2.5 percent in the third quarter of fiscal 2016. Importantly, sales comparisons ease significantly as the combined comparable store sales for November and December of the prior year decreased 5 percent. The company expects diluted earnings per share for the third quarter to be between 51 cents and 55 cents, as compared to 46 cents in the same prior year period, an increase of 10 to 20 percent.
Van Heel continued, “While this has been a difficult year thus far, we see the opportunity for positive comparable store sales trends for the remainder of the year as prior year comparisons ease due to the mild winter weather throughout our markets last year. In this challenging operating environment, we continue to leverage our flexible business model and pursue attractive acquisition opportunities we see in the marketplace. We are pleased that in just the first half of the fiscal year, we have opened a net 68 stores, two retread facilities and four wholesale centers through acquisitions and greenfield growth. Our fiscal 2017 acquisitions represent $135 million or 14 percent in annualized sales growth and approximately 25 percent growth in tire units. We are confident that these new locations, combined with our robust acquisition pipeline, will allow us to drive even greater economies of scale and sales and earnings growth for many years to come.”
