MNRO - NASDAQ

Good morning, ladies and gentlemen, and welcome to the Monro, Inc.’s Earnings Conference Call for the First Quarter of fiscal 2025. [Operator Instructions] And as a reminder, this conference call is being recorded and may not be reproduced in whole or in part without permission from the company. I would now like to introduce Felix Veksler, Senior Director of Investor Relations at Monro. Please go ahead.

Thank you. Hello, everyone, and thank you for joining us on this morning’s call. Before we get started, please note that as part of this call, we will be referencing a presentation that is available on the Investors section of our website at corporate.monro.com/investors. If I could draw your attention to the safe harbor statement on Slide 2, I’d like to remind participants that our presentation includes some forward-looking statements about Monro’s future performance. Actual results may differ materially from those suggested by our comments today. The most significant factors that could affect future results are outlined in Monro’s filings with the SEC and in our earnings release. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Additionally, on today’s call, management’s statements include a discussion of certain non-GAAP financial measures, which are intended to supplement and not be substitutes for comparable GAAP measures. Reconciliations of such supplemental information to the comparable GAAP measures will be included as part of today’s presentation and in our earnings release. With that, I’d like to turn the call over to Monro’s President and Chief Executive Officer, Michael Broderick.

Thanks, Brian. Our business has long-term durability in an industry that remains fundamentally strong. We have implemented initiatives that are beginning to drive an improvement in our topline results. This, along with our foundational progress to expand margins and generate cash flow will enable Monro to reap benefits as tire volumes continue to recover. We are poised to win with our scale, strategic relationships and our experienced management team. With that, I will now turn it over to the operator for questions.

[Operator Instructions] The first question is from Brian Nagel with Oppenheimer & Co.

Congrats on a good progress here. So the first question I have is, Michael, this -- I mean maybe you talked a lot about the -- Michael and Brian, you both talked a lot about the improvement in sales with the topline improvement as the quarter progressed. But could you go into a little more detail about really what, from your perspective, help to drive that, the more significant improvement in the month of June. And it sounds like it was more in the tire category. I guess the question I’m asking is that, did you see -- is it your initiatives? And maybe you can describe that more? Or are you starting to see also an improving sector backdrop? Because I know this over the last few quarters, we’ve talked about a really difficult backdrop for the sector?

Brian, I’ll take it. It’s Mike. First of all, we are on a journey for a profitable growth. So I kind of looked at it. We started with tires going through this. I would say the consumer, we don’t see anything different in the consumer from the last time we talked. But we did talk about the fact that the tire category is very much in our control. And the decisions that we made going back to when we last presented in May is that we were going to become highly promotable and we were going to lead with tires, and we were going to go get the tires back. Although we were -- tire units are down in the industry, we talked about that. That still hasn’t changed. There’s still a lot of tires being sold and we were going to get more than our fair share. That was the decision that we made. We were going to rely on our vendor partners to help support us, making sure that they are helping us drive value with the tire category. I would say that we started seeing unit growth in June. We expected that and I would say that we’re going to continue literally as long as the consumers the way they are acting right now, we’re going to stay very high promotions or strong promotions in order to drive the tire category. Now let’s turn the conversation which really is the focus of my attention, my organization’s attention. The service categories, highly profitable service categories are still underperforming. I like what batteries are doing, I actually consider, hey, do we have a little weather bump in June because we got a lot of hot weather. And I think a credit a little bit of that to weather. But we also really put together an inspection process, we call it ConfiDrive, driving a better process in the store, and we continue in the month of July, strong battery performance. So I really do credit a lot of the focus on batteries to just a better inspection process, but I’m not happy with our service category. I don’t think the consumer is -- has changed just like we’ve done with tires, we’re going to go get back our service categories. And that’s across the board. And I really feel that’s very much in our control, has nothing to do about the consumer. There’s still a lot of brakes being sold in the marketplace, and we’re going to go get more than our fair share of breaks. And last, Brian, just -- none of this has to do with the staffing. We’re in good shape. We have more technicians than we did last year. When I talk about technicians, these are flat-rate technicians. Most of our productivity initiatives that we put in place are making our hourly employees become more productive. In the past, I talked about them it’s taken as long as 90 days to get them productive, and now we’re talking about 3 weeks. And that’s the big change in our organization, and it’s really a Monro story. And I’ve talked about this before, Brian. It’s a self-help story, and I still believe it’s a very much of a self-help story.

The next question is from Bret Jordan with Jefferies.

Could you talk about, I guess, what the price versus unit or traffic impact was on the Q1 comp is?

Yes. Price was slightly up, and you can do the math on the rest and ticket was -- when I look at traffic, it was significantly down, and that’s what we’re focused on. When I look at June, and specifically on the tire category, it was basically flat in units and flatten ticket.

Okay. And then the oil price promotional strategy, I think Bridgestone, Firestone is doing similar. Do you see sort of a broader traffic driver in the oil category? Is it sort of a -- is it a managed discounting? Or are things getting more competitive out there?

It’s a managed discounting. It’s really very much of a focus on making sure that we say yes to our consumers. I would say that as the consumers are looking for more value, they can see the promotions that we have. And then really, the work that we have to do, Monro has to do is making sure that when these customers walk in that we can take care of their needs within 45 minutes, and as we do that we get rewarded with sales.

The next question is from David Lantz with Wells Fargo.

Got it. That’s really helpful. And then last one for me. The quarter-to-date comps for July are a bit weaker than June. Curious if you can talk about the drivers of that and if it’s just really a function of compares or if there’s something else going on?

David, this is Mike. I’ll take that. There’s nothing going on. I would say that it is a soft to compare, but we’re very focused on just continuing to get – to improving quarter-over-quarter since I don’t have a crystal ball of what’s going to happen for the rest of the year. And last but not least, I want to leave with happy with the tire. We’ll continue with the tire unit story, and now it’s all about moving to service categories that obviously have a significant margin opportunity for our company.

We currently have no further questions. I’ll hand back over to Mr. Broderick for closing remarks.

Thank you for joining us today. This continues to be an exciting time be part of Monro. We have a strong foundation to build upon to create long-term value for all of our stakeholders. I look forward to keeping you updated on our progress. Have a great day.