According to Monro, Inc.‘s financial results for the third quarter, Q3 sales for the fiscal year ending March 27, 2021 (fiscal 2021) decreased 13.6% to $284.6 million, as compared to $329.3 million for the third quarter of the fiscal year ended March 28, 2020 (fiscal 2020).
The total sales decrease for the third quarter of $44.7 million was driven by a comparable store sales decline of 13% for the period and a decrease in sales of $7.2 million from closed stores, partially offset by an increase in sales from new stores of $2.2 million, including sales from recent acquisitions of $1.5 million, Monro says. Comparable store sales were down approximately 8% for tires, 16% for alignments, 17% for front end/shocks, 19% for maintenance services and 21% for brakes compared to the prior-year period.
The company says it experienced improved tire margins, driven by the completed rollout of the company’s tire category management and pricing tool. This was more than offset by a higher sales mix of tires compared to the prior-year period, which resulted in higher material costs as a percentage of sales. Variable gross margin was also negatively impacted by higher technician labor costs as a percentage of sales compared to the prior-year period, particularly in the first two months of the quarter.
“Our results for the third quarter were impacted by general market conditions and lower labor productivity levels, particularly in the first two months of the quarter. After proactively decreasing staffing at the outset of the COVID-19 pandemic, we quickly ramped up staffing in our stores over the past two quarters as demand returned. As a result, we added approximately 700 new teammates since July that required time to fully ramp. Improving market conditions, as well as the successful onboarding and training of our new teammates, led to an improved top-line performance in December, which posted the best comparable-store sales since the beginning of the pandemic. This has continued into January with a comparable store sales increase of 3%,” said Robert Mellor, chairman of the board of directors and interim CEO.
Monro says the company’s efforts to optimize store staffing and increase teammate productivity led to lower technician labor costs as a percentage of sales in December compared to the prior-year period. Total operating expenses decreased $12.3 million to $80.5 million, or 28.3% of sales, as compared to $92.8 million, or 28.2% of sales in the prior-year period. The year-over-year dollar decrease primarily resulted from targeted cost reductions and lower expenses from 29 fewer stores compared to the prior-year period. The slight increase in operating expenses as a percentage of sales in the third quarter of fiscal 2021 compared to the previous year period was driven by a decrease in comparable-store sales.
Net income for the third quarter of fiscal 2021 was $6.7 million, as compared to $18.9 million in the same period of the prior year.
During the third quarter of fiscal 2021, the company opened 19 company-operated stores, while temporarily closing one store as a result of storm damage and permanently closing one franchise location. Additionally, four company-operated stores remain temporarily closed as a result of damage sustained during Hurricane Laura in Louisiana and Tropical Storm Isaias in the Northeast. Monro ended the quarter with 1,260 company-operated stores and 96 franchised locations. The company completed the previously announced acquisition of 17 stores in Southern California. These locations are expected to add approximately $20 million in annualized sales, Monro says.
“We remain financially strong and well-positioned to execute against all of our growth initiatives and made significant progress during the third quarter,” Mellor said. “Importantly, we substantially completed the transformation of 104 stores and our rebranded and reimaged stores continue to outperform our chain average. Additionally, we completed the rollout of our store staffing and scheduling optimization tool and tire category management and pricing system, both of which are instrumental in driving profitable growth. Our initiatives are working and we look forward with confidence in our business.”
For the current nine-month period, sales decreased 15.5% to $820.2 million from $970.5 million in the prior-year period. Comparable store sales decreased 16.8% compared to a decrease of 0.1% in the prior-year period. Gross margin for the nine-month period was 35.1% of sales, compared to 38.6% in the prior-year period. Operating income was 6.3% of sales, compared to 10.4% in the prior-year period. Net income for the first nine months of fiscal 2021 was $22.5 million, as compared to $61.8 million in the comparable period of fiscal 2020.