Monro, Inc. reported a 22% decrease in store sales for the first quarter of 2021 as well as staffing changes, as it continues to feel the effects of the coronavirus pandemic across the 32 states in which it operates, according to the company’s first-quarter financial results.
Sales for the first quarter of the fiscal year 2021 decreased to $247.1 million, compared to $317.1 million for the first quarter of the fiscal year 2020, which ended March 28, 2020. Monro’s total sales decrease for the first quarter of $70 million was driven by a comparable store sales decline of 25.8%, partially offset by sales from new stores of $12.7 million, including sales from recent acquisitions of $11.1 million, according to its financial results.
During Q1 of fiscal 2021, Monro also closed 36 underperforming locations, in addition to the six stores it closed in Q4 of fiscal year 2020, said Brett Ponton, CEO of Monro, Inc., in a call with investors July 29. However, Ponton said these store closings were planned before COVID-19 to streamline the company’s real estate portfolio. Monro ended the quarter with 1,247 company-operated stores and 97 franchised locations.
Despite challenges as a result of the coronavirus, Ponton said the company is continuing with its M&A strategy and will gradually pick up its store rebrand and reimage initiative in Q2 of fiscal year 2021. Ponton said the company has also completed the rollout of its collaboration with Amazon.com to provide tire installation services at all its retail locations.
“Our first quarter performance demonstrates solid execution despite the unprecedented challenges related to the COVID-19 pandemic, and I would like to thank all of our Monro teammates for their hard work and dedication to safely serving our customers,” Ponton said. “In-line with our expectations, April represented a low point in our sales performance, with May and June improving sequentially as government restrictions gradually abated through the quarter. Encouragingly, the demand recovery continued in fiscal July with comparable store sales down approximately 12%.
“Since the beginning of the pandemic, we have taken a number of proactive steps to mitigate near-term headwinds while maintaining our focus on our Monro.Forward initiatives, including our technology-based store staffing model and our tire category management and pricing system, and are pleased that these efforts have begun to bear fruit. In addition to streamlining our operations, we have redirected our marketing efforts towards higher ROI digital channels and made strategic investments in technology, which we believe have been critical in helping us navigate the current environment.
Ponton said by segment, comparable store sales were down approximately 14% for tires, 32% for alignments, 35% for maintenance services, 36% for front end/shocks and 41% for brakes compared to the prior year period. However, the company noted that performance across all product and service categories improved sequentially throughout the quarter as state and local governments began to loosen restrictions and reopen their economies.
The company’s gross profit margin decreased from 40.4% to 35.4% (500 basis points) compared to the year prior. Monro attributed this to lower comparable store sales, which resulted in higher fixed distribution and occupancy costs as a percentage of sales, as well as lower vendor rebates due to slower inventory turns compared to the prior year period and a higher sales mix of tires compared to the prior year period, which resulted in higher material costs as a percentage of sales. This was also partially offset by lower technician labor costs as a percentage of sales related to the company’s store staffing optimization initiative, the company said.
Operating income for the first quarter of fiscal 2021 was $11.4 million, or 4.6% of sales, as compared to $36.4 million, or 11.5% of sales, in the prior year period, according to Monro’s earnings report. Interest expense was $7.4 million for the first quarter of fiscal 2021, as compared to $7.2 million for the first quarter of fiscal 2020.
Monro’s net income for the first quarter of fiscal 2021 was $3 million, as compared to $22.6 million in the same period of the prior year.
“Despite the challenges presented by COVID-19, we are encouraged by the outperformance of our rebranded stores during the first quarter, reinforcing our confidence in our store rebrand and reimage initiative,” Ponton said. “Our solid financial position will allow us to gradually resume this program in the second quarter as we continue our disciplined approach to capital allocation. Overall, we remain focused on the aspects of our business within our control, and we believe that the continued execution of our Monro.Forward strategy will enable us to emerge stronger following this pandemic and drive long-term value creation.”
With economic uncertainty caused by COVID-19, Monro shied away from making any predictions on the full impact of the pandemic on overall demand and the company’s operations for the remainder of the year. While it did not provide fiscal 2021 guidance, the company said the ongoing pandemic has continued to impact its financial results in the second quarter-to-date.