Auto services provider Monro (NASDAQ:MNRO) fell short of analysts' expectations in Q3 FY2024, with revenue down 5.2% year on year to $317.7 million. It made a non-GAAP profit of $0.39 per share, down from its profit of $0.43 per share in the same quarter last year.
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Monro (MNRO) Q3 FY2024 Highlights:
- Market Capitalization: $933.9 million
- Revenue: $317.7 million vs analyst estimates of $324.8 million (2.2% miss)
- EPS (non-GAAP): $0.39 vs analyst expectations of $0.39 (small miss)
- Gross Margin (GAAP): 35.5%, up from 33.8% in the same quarter last year
- Same-Store Sales were down 6.1% year on year
- Store Locations: 1,347 at quarter end, increasing by 51 over the last 12 months
Started as a single location in Rochester, New York, Monro (NASDAQ:MNRO) provides common auto services such as brake repairs, tire replacements, and oil changes.
Auto Parts RetailerCars are complex machines that need maintenance and occasional repairs, and auto parts retailers cater to the professional mechanic as well as the do-it-yourself (DIY) fixer. Work on cars may entail replacing fluids, parts, or accessories, and these stores have the parts and accessories or these jobs. While e-commerce competition presents a risk, these stores have a leg up due to the combination of broad and deep selection as well as expertise provided by sales associates. Another change on the horizon could be the increasing penetration of electric vehicles.
Sales GrowthMonro is a small retailer, which sometimes brings disadvantages compared to larger competitors that benefit from economies of scale.
As you can see below, the company's revenue was flat over the last four years (we compare to 2019 to normalize for COVID-19 impacts) as its store footprint remained relatively unchanged, implying that growth was driven by more sales at existing, established stores.
This quarter, Monro missed Wall Street's estimates and reported a rather uninspiring 5.2% year-on-year revenue decline, generating $317.7 million in revenue. Looking ahead, Wall Street expects sales to grow 4.8% over the next 12 months, an acceleration from this quarter.
Number of StoresA retailer's store count is a crucial factor influencing how much it can sell, and store growth is a critical driver of how quickly its sales can grow.
When a retailer like Monro keeps its store footprint steady, it usually means that demand is stable and it's focused on improving operational efficiency to increase profitability. Monro's store count increased by 51 locations, or 3.9%, over the last 12 months to 1,347 total retail locations in the most recently reported quarter.
Taking a step back, the company has kept its physical footprint more or less flat over the last two years while other consumer retail businesses have opted for growth. A flat store base means that revenue growth must come from increased e-commerce sales or higher foot traffic and sales per customer at existing stores.
Same-Store SalesMonro's demand within its existing stores has barely increased over the last eight quarters. On average, the company's same-store sales growth has been flat.
In the latest quarter, Monro's same-store sales fell 6.1% year on year. This decline was a reversal from the 5.6% year-on-year increase it posted 12 months ago. We'll be keeping a close eye on the company to see if this turns into a longer-term trend.
Key Takeaways from Monro's Q3 Results It was good to see Monro beat analysts' gross margin expectations this quarter by executing inventory optimizations. That stood out as a positive in these results. On the other hand, its revenue unfortunately missed analysts' expectations, driven by a 6.1% decrease in its same-store sales. Management noted its tires segment performed the worst, with same-store sales dropping 9%. This was due to pressured low-to-middle-income consumers deferring purchases in the company's higher-priced tire offerings. Industry data from Torqata, however, shows that the company's tire performance was in line with the broader industry and that it maintained its market share during the period. Because of these headwinds, Monro now expects full-year sales to be flat year on year. Overall, this was a mediocre quarter for Monro. The stock is flat after reporting and currently trades at $29.7 per share.