Monro, Inc. announced its third-quarter financial results this week, reporting a 20% increase in sales from $341.8 million compared to $284.6 million for the third quarter of the fiscal year ended March 27, 2021. Growth in the company’s third quarter, which ended December 25, 2021, was attributed to Monro’s strong cash flow, its teammates, and Monro.Forward initiatives, as well as investments in attractive acquisition opportunities intended to drive long-term sustainable growth, the company said.
During the third quarter of fiscal 2022, Monro reported that it opened 17 stores through acquisitions and closed two stores. Monro ended the quarter with 1,303 company-operated stores and 81 franchised locations.
“Monro’s solid third-quarter results reflect significant progress on our journey to transform this great organization and unleash its full potential. Led by growth in our key service categories, we posted our third consecutive quarter of double-digit comparable store sales growth across all regions and categories as well as year-over-year margin expansion,” said Mike Broderick, president and CEO. Incremental investments in high-quality technicians were critical to delivering improved topline results in the quarter and have allowed us to navigate through staffing challenges posed by COVID over the last six weeks. Our preliminary fiscal January comparable store sales increased 1% compared to fiscal January of last year and were 4% above pre-COVID levels. Our teammates have done a tremendous job of navigating COVID-related disruption and will once again be fully focused on continuing to deliver topline growth as this latest wave of the pandemic passes.”
Broderick continued, “Looking ahead, we will continue to invest in our teammates as we execute on our Monro.Forward strategy and build a best-in-class service model. This will position us for outsized sales growth as we capitalize on robust demand and multi-year industry tailwinds. We are committed to the highest standards of operational excellence that will enable a virtuous cycle of earnings growth and cash flow generation and allow us to continue to invest in value-enhancing acquisitions.”
According to Monro’s financial results, the total sales increase for the third quarter of $57.2 million resulted from a comparable store sales increase of 13.8% for the period and an increase in sales from new stores of $18.5 million, primarily from recent acquisitions. This compares to a decrease in comparable store sales of 13% in the prior-year period, which was impacted by a substantial decrease in traffic related to the COVID-19 pandemic.
Monro says comparable store sales increased approximately 28% for both brakes and alignments, 14% for front/end shocks and 11% for both tires and maintenance services compared to the prior-year period.
Gross margin increased 150 basis points to 35.3% in the third quarter of fiscal 2022 from 33.8% in the prior-year period. The increase was due to higher comparable-store sales in the third quarter of fiscal 2022, which resulted in lower fixed distribution and occupancy costs as a percentage of sales, as well as a larger sales mix of higher-margin service categories, compared to the prior-year period, according to the report. Incremental investments in technician payroll to support current and future sales growth amidst improving customer demand partially offset the increase in gross margin and resulted in higher technician payroll costs as a percentage of sales in the third quarter compared to the prior year period, Monro says.
Total operating expenses for the third quarter were $93.1 million, or 27.3% of sales, as compared to $80.5 million, or 28.3% of sales in the prior-year period, according to Monro. The year-over-year dollar increase resulted from increased store management payroll and store operating expenses needed to support strong consumer demand, as well as expenses from 43 net new stores compared to the prior-year period.
Monro reported operating income for the third quarter of fiscal 2022 was $27.4 million, or 8% of sales, as compared to $15.7 million, or 5.5% of sales in the prior year period. Interest expense was $5.7 million for the third quarter of fiscal 2022, as compared to $6.8 million for the third quarter of fiscal 2021, principally due to a decrease in weighted average debt, Monro says.
Net income for the third quarter of fiscal 2022 was $16.3 million, as compared to $6.7 million in the same period of the prior year. Income tax expense in the third quarter of fiscal 2022 was $5.5 million, or an effective tax rate of 25.3%, compared to $2.3 million, or an effective tax rate of 25.2%, in the prior year period.
