Monro Inc. Reports Sales Decline but Margin Growth in Q1

Monro, Inc. (MNRO) reported a 10.3% decline in first-quarter sales year-over-year, totaling $293.2 million during its earnings call for fiscal 2025. However, the company noted an improvement in comparable store sales, particularly with tire units experiencing growth in June.

Gross margins expanded due to better labor efficiencies and decreased material costs, with the company expecting continued margin growth and enhanced profitability in the second quarter. CEO Mike Broderick emphasized the company’s commitment to pursuing profitable growth, particularly in the tire sales and service areas.

### Key Takeaways
– First-quarter sales declined 10.3% to $293.2 million, with comparable store sales down 9.9%.
– Tire units saw mid-single-digit growth in June.
– Efforts are underway to boost sales in battery units and enhance overall sales figures.
– Gross margins improved due to labor optimization and productivity enhancements.
– Operating cash flow is projected to reach at least $120 million for fiscal 2025.
– Capital expenditures are planned between $25 million and $35 million for the fiscal year.
– The company aims to gain market share in tire sales and improve service offerings.
– Staffing levels remain strong, with heightened technician productivity.
– Q1 gross margins exceeded expectations, and a similarly positive outlook is expected for Q2.

### Company Outlook
– Monro anticipates enhanced profitability and gross margin expansion in Q2 and throughout fiscal 2025.
– The focus will remain on optimizing profitability in critical service categories and expanding tire offerings.

### Bearish Highlights
– Year-over-year sales and comparable store sales faced a notable decline.
– Q2 comparable sales might experience pressure due to softer comparisons.

### Bullish Highlights
– Tire unit sales bounced back in June.
– The company is implementing plans to capture a greater market share within the tire category through ongoing promotions.
– Improvements in gross margins have outstripped expectations due to increased productivity.

### Misses
– The comp loss was less pronounced than expected, with a 10% decline instead of 12%, resulting in a negative earnings impact of $0.07.
– Performance in the service category did not meet expectations, although there were improvements in battery sales.

### Q&A Highlights
– CEO Mike Broderick discussed strategies for profitable growth with a focus on tire sales.
– The discussion included efforts to enhance performance in service categories such as brake services.
– The company reported strong staffing and technician productivity, supporting improvements in gross margins.
– Despite weaker year-to-date comp sales in July compared to June, the company remains committed to continuous improvement.

Monro, Inc. concluded the earnings call with optimism about future growth and the creation of long-term value for stakeholders, emphasizing a strategic focus on enhancing profitability and market share in both tire and service areas.