Jennifer Milan – IR John van Heel – President and CEO Cathy D’Amico – EVP and CFO Rob Gross – Chairman.

Bret Jordan – BB&T Capital Markets James Albertine – Stifel Nicolaus Rick Nelson – Stephens Scott Stember – Sidoti & Company Michael Montani – ISI Group Peter Keith – Piper Jaffray Gary Balter – Credit Suisse.

Good morning, ladies and gentlemen, and welcome to the Monro Muffler Brake’s First Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

(Operator Instructions) As a reminder, ladies and gentlemen, this conference is being recorded and may not be reproduced in whole or in part without permission from the company. I would now like to introduce Ms. Jennifer Milan of FTI Consulting. Please go ahead..

Thank you. Hello, everyone, and thank you for joining us on this morning’s call. I would just like to remind you that on this morning’s call, management may reiterate forward-looking statements made in today’s release.

In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, I would like to call your attention to the risks and uncertainties related to these statements, which are more fully described in the press release and the company’s filings with the Securities and Exchange Commission.

These risks and uncertainties include, but are not necessarily limited to, uncertainties affecting retail generally such as consumer confidence and demand for auto repair, risks relating to leverage and debt service including sensitivity to fluctuations in interest rates, dependence on and competition within the primary markets, in which the company’s stores are located, and the need for and cost associated with store renovations and other capital expenditures.

The company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

The inclusion of any statement in this call does not constitute an admission by Monro or any other person that the events or circumstances described in such statements are material.

Joining us for this morning’s call from management are John van Heel, President and Chief Executive Officer; Cathy D’Amico, Chief Financial Officer; and Rob Gross, Executive Chairman. With these formalities out of the way, I’d like to turn the call over to John van Heel. John, you may begin..

Thanks, Jen. Good morning and thank you for joining us on today’s call. We are pleased that you are with us to discuss our first quarter fiscal 2014 performance. After some brief opening remarks, I will review our quarterly performance then provide you with an update on our key initiatives and outlook for the remainder of the year.

I’ll then turn the call over to Cathy D’Amico, our Chief Financial Officer, who will provide additional details on our financial results.

I want to start by saying that although our first quarter results are weaker than we had hoped our strong business model and execution against our long-term growth strategy enables us to increase our market share and deliver sales and net income growth of 22% and 17% respectively.

This is a testament to our proven strategy and the initiatives that have helped us consistently lead our industry during both strong and weak markets.

We said that 2014 would be marked by increased traffic in sales reduced higher cost, expense reduction, significant sales and earnings contribution from our recent acquisitions, and opportunities to make further accretive acquisitions at attractive price.

While we still have market on predicating sales, we delivered on all these other important objectives in the first quarter and expect these positive trends to grow as we progress in fiscal 2014.

In fiscal 2013, we achieved record acquisition growth providing us with greater economies of scale and positioning the company to deliver strong earnings over the next several years.

Importantly, we continue to be very encouraged by our fiscal 2013 acquisition, which generated $44 million of sales and contributed to our earnings for the quarter outperforming our plan. As a reminder, starting in our first quarter, the Kramer stores are included in our comparable store sales base.

We are not pleased with our first quarter comparable store sales performance, which softened in the final six weeks of the quarter after consistently tracking up 3% in the first seven weeks. We believe this is primarily the result of the macro environment as reflected by the softer retail sales generally in June.

Consumers increasingly turn to us during the quarter to perform the necessary work to maintain and expand the life of their vehicles as evidenced by a 2% increase in our comparable store oil change traffic on top of the 2.5% increase last year and a 4% increase in comparable store tire units in the quarter.

However, customers continued to defer more costly purchases and trade down resulting in flat or slightly positive comparable store sales in key category.

While the 4% comp tire unit increase demonstrates the pent-up demand for tires, the impact of customers trading down and lower average price is selected translated to a tire category sales increase of approximately 1%.

However, our continuing focus on reducing import tire cost allows us to offer great value to customers that are trading down at better margins for us. That said, we are optimistic for improved performance in the second half of the year given the 4% comp tire, and 2% oil change unit increases in the first quarter.

And will return to more normalized weather, particularly as we will be cycling against two consecutive years of unseasonably warm weather and the two year deferral cycle.

At the end of the day, people can only defer purchases of our products and services for so long, we’re confident that they will continue to turn to us as their trusted service provider.

Gross margin declined versus the prior year as expected, primarily due to the continued shift in sales mix to the lower margin tire categories which is a result of high mix of tire sales of recent acquisitions.

We continue to take a number of steps to help improve margins and they are seeing continued declines in tire and oil cost, all of which we expect will benefit our margins as we move through fiscal 2014.

Specifically, we continue to leverage the significantly increased purchasing power that is resulted from our recent acquisition and our ability to shift purchases between our broad base of vendors.

As discussed on prior calls, and as a result of our recent acquisitions, we were able to negotiate lower oil costs that took effect during the second quarter of fiscal 2013 and benefited our first quarter this year by approximately $500,000. We are also seeing continued improvements in tire costs.

As noted previously, we received a 10% reduction in import tire costs, after the September 2012 expiration of the tariff on Chinese tires and an additional 5% cost reduction on import tires that took effect January 1st.

In addition to these savings, we continue to take a proactive approach in negotiating lower tire costs from both domestic – from both import and domestic suppliers.

As a reminder, these cost reductions fall into our cost of goods sold as our tire inventory turns and in the case of import tires time from order to receipt of goods is approximately 90 days. Accordingly many of these discounts are renegotiated will flow through our cost of goods sold later this fiscal year.

We also continued to carefully manage operating costs, while keeping mindful that we are a growth company. For the first quarter total operating expenses as a percent of sales were 27.1% versus 28.6% in the prior year.

For fiscal 2014, we continue to expect these actions combined with declining material costs to improve our operating model and allow us to generate EPS growth and our base business at a 0% comp, whereas in the past we needed a 2% to 2.5% comp sales increase to overcome normal inflationary cost increase.

Our first quarter results demonstrate the benefits of these actions. Turning now to our growth strategy, we remained focused on increasing our market share with comparable store sales growth, opening new stores in the existing markets and acquiring competitors at attractive valuation.

As discussed previously, fiscal 2013 was our strongest year ever for acquisition growth and whilst still somewhat early in the operational transition and the sales environment remains challenging, we are pleased with the results of these stores thus far.

In this choppy sales environment we remain focused on increasing our market shares, while strengthening our key competitive advantages and our operating leverage through accretive acquisition. To that end, we are pleased to announce that we executed a definitive agreement to acquire 10 Curry’s Auto Service stores.

This acquisition will increased our number of stores in the Greater Washington D.C. market to 37, selling in a key market and adds approximately $18 million in annual sales. This transaction is expected to close in mid-August.

Importantly, the sales mix of these stores is approximately 80% auto service and 20% tires which plays very well into one of our key competitive advantages of being able to store high-quality part very cost effectively.

We saw great results with the best of these stores we acquired in fiscal 2012 another group of stores that has a high mix of service sales. The high mix of service sales will also help in part to offset the pressure we have been seeing from the sales mix shift in tires.

We expect the 30 stores to be slightly dilutive in the second quarter for the full fiscal year.

Selectively, our acquisitions decreased our purchasing power with vendors, reducing material and other cost and allowing us to further leverage distribution, advertising field management, and headquarters G&A cost, all of which will drive operating margin improvements going forward.

With ongoing sellers concerns over the operating environment as well as higher taxes and healthcare cost, we continue to see meaningful opportunity for attractive deals in the marketplace.

Additionally, all of the independent tire dealers we are looking to acquire are getting older and many are at or nearly retirement age without an internal succession option. We presently have seven NDA signed after taking the six months break to integrate our fiscal 2013 acquisition.

Five of these NDAs are within our footprint and two are in the continuous market with store chains ranging in size from 5 to 40 locations. Based on the current transaction, the current macro environment, and our existing NDAs, we think the acquisition environment can heat up further in the second half of the year.

We have plenty of liquidity combined with strong cash flow to complete these deals and remained very disciplined on the prices we pay with 7 to 7.5 times EBITDA, or about 80% of sales being our key metric. Importantly, we continue to compete only with the sellers’ expectations in these deals.

Turning now to our outlook, while we have limited visibility among the state of the consumer may ultimately improve, and we expect that the environment will remain choppy in near-term. We are optimistic about our ability to deliver comparable store sales increases for the full year fiscal 2014 based on easy comparisons I had.

To-date in the second quarter, oil change traffic remains positive and comparable store sales are trending flat to last year. We expect this trend to continue through our second quarter.

That said, we are optimistic that with the increase in comparable store tire and oil change unit and with more normalized weather throughout the high tire selling season, two years of increase in customer deferrals will reverse and present a tailwind for sales in the second half of fiscal 2014.

In addition, our fiscal 2013 acquisitions positioned Monro for profitable growth over the next several years, including fiscal 2014.

For the full fiscal year, taking into account the anticipated sales contributions from the Curry acquisition, we now expect total sales to be in the range of $840 million to $860 million, incorporating a comparable store sales increase in the range of 1% to 3%.

Based on these assumptions, we now estimate full fiscal year 2014 EPS of $1.58 to $1.70, which compares to EPS of $1.32 in fiscal 2013 and which at the high-end of our anticipated range represents a 29% increase in EPS and a 100 basis points of operating margin improvement.

Based upon trends to-date and taking into account the Curry acquisition, we expect total sales for the second quarter to be $209 million to $214 million incorporating comparable store sales growth of 0 to 2%.

We expect second quarter earnings per share to be in the range of $0.41 to $0.45 with the fiscal 2013 acquisitions contributing to earnings and the Curry acquisition slightly dilutive. This compares to $0.36 for the second quarter of fiscal 2013.

As I discussed earlier, the shift in sales mix for the tire category, primarily related to acquisitions will continue to pressure gross margin, particularly in the second quarter.

This in fact is more pronounced in the first half of the year as we incorporate the acquired stores, higher tire sales mix for the first time, and continue the first year operational transition of these stores. We expect that operating margin for the second quarter will be flat or 50 basis points better than last year’s second quarter.

Operating margins should improve throughout the year from higher sales, expense reduction, lower material costs and increase in leveraging contribution from our fiscal 2012 and 2013 acquisitions.

Our five year plan continues to call for on average 15% annual top line growth, including 10% growth through acquisition, 3% to 4% comps, and the 1% to 2% increase from Greenfield stores.

Our acquisitions are generally dilutive to earnings in the first six months as we overcome due diligence and deal related costs while working through initial inventory and the operational transition of these stores.

With cost savings and recovery in sales, results are generally breakeven to slightly accretive year one, $0.08 to $0.10 accretive year two and another $0.08 to $0.10 accretive in year three, with 30% acquisition growth just triple those EPS (inaudible).

Over the five year period that should improve operating margins approximately 300 basis points and deliver an average of 20% bottom line growth. Given the timing of our fiscal 2013 acquisitions, we expect to see increase in contribution from these deals through fiscal 2000 – throughout 2014 and even greater contribution in fiscal 2015.

We are confident that our disciplined acquisition strategy is strengthening our position in the marketplace and will continue to provide meaningful value to shareholders for many years to come. Before I turn the call over to Cathy, I would like to reiterate that my confidence in our business and outlook for our industry remains very positive.

There are still 245 million cars on the road in the U.S. that are getting older. Consumers still can work on these vehicles. And the number of overall service days is declining and the availability of suitable acquisition candidate is accelerating.

Further, our key competitive advantages are still in place including our low cost operations, superior customer service and convenience along with our store density and two brand core strategy.

In closing, I would like to thank all of our employees for their continued hard work, passion for superior customer service and consistent execution, all of which are critical to Monro’s brand strength and success. With that, I’d like to turn the call over to Cathy for a more detailed review of our financial results..

Thank you, John. Good morning, everybody. Sales for the quarter increased 21.9% and new stores which we define as stores opened or acquired after March 31, 2012, added $36 million of which $34.4 million came from the fiscal 2013 acquisition costs excluding Kramer. Kramer stores are comparable stores as of March 31, 2013.

Reported comparable store sales including the Kramer stores increased 1.2%, and there was a decrease in sales from closed stores of approximately $1 million. There were 90 selling days in both the current and prior year first quarters. At June 29, 2013 the company had 935 company operated stores as compared with 836 stores at June 30, 2012.

During the quarter ended June 2013, the company opened one store and closed three. Gross profit for the quarter ended June 2013 was $78.9 million or 38.3% of sales as compared with $68.1 million or 40.3% of sales for the quarter ended June 2012.

The decrease in gross profit for the quarter ended June 2013 as a percentage of sales is primarily due to material costs. Total material costs including outside purchases increased as a percentage of sales as compared to the prior year.

As John mentioned, the increased material costs as a percentage of sales is largely due to a shift in mix of the lower margin tire category contributed in large part to the FY ‘12 tire store acquisition.

In fact, including the results of the fiscal year ‘13 acquisition stores, gross profit as a percent of sales in total was essentially flat with the prior year quarter. The increase in total material cost was offset in part by decreases in labor and distribution and occupancy costs as a percentage of sales.

Labor productivity as measured by sales per man-hour improved over the prior year quarter. Additionally, the company achieved some leverage of distribution and occupancy cost as a result of the positive comparable store sales in the quarter as well as the increased sales from last year’s acquisition.

Operating expenses for the quarter ended June 2013 increased $7.3 million and were $55.8 million, or 27.1% sales as compared with $48.4 million, or 28.6% of sales for the quarter ended June 2012. This demonstrates that the company experienced leverage in this line with the increase in comparable stores sales and consolidated cost control.

Operating income for the quarter ended June 2013 of $23.1 million increased by 17.4% as compared to operating income of approximately $19.7 million for the quarter ended June 2012 and decreased as a percentage of sales from 11.6% to 11.2%.

While net interest expense for the quarter ended June 2013 was relatively flat as a percentage of sales as compared to the same period last year, the weighted average debt outstanding for the first quarter of fiscal 2014 increased by approximately $97 million. This compares to the first quarter of last year.

This increase is primarily related to an increase of debt outstanding under the company’s revolving credit facility for the purchase of our recent acquisitions as well as an increase of capital leases recorded in connection with the connects with the tax approval.

Largely offsetting this increase was a decrease in the weighted average interest rate of approximately 250 basis points for the prior year due to a shift of a larger percentage of debt that being revolver versus capital leases at a lower rate.

The effective tax rate for the quarter ended June 2013 and June 2012 was 36.4% and 36.9% respectively of pre-tax income. Net income for the current quarter of $13.6 million increased 16.6% from net income for the quarter ended June 2012. Earnings per share on a diluted basis of $0.42 increased 16.7% as compared to last year’s $0.36 per share.

Our balance sheet continues to be strong. Our current ratio of 1.2 to 1 is comparable to last year’s first quarter and to our year end, reaching year end. For the quarter ended June 29, 2013, we generated approximately $34 million of cash flow from operating activities and received about $2 million from the exercise of stock option.

We used the cash flow from operations to pay out $25 million of debt, finance approximately $7 million of CapEx, and pay about $4 million of dividends to shareholders. At the end of the first quarter, long-term debt consisted of $104 million of outstanding revolver debt and $62 million of capital leases and financing obligations.

As a result of the debt pay down, our debt to capital ratio including cap leases decreased 400 basis points to 30% at June 2013 from 34% at March, 2013. Without capital and financing leases, our debt to capital ratio was 22% at the end of June 2013, a decrease from 26% at March ‘13.

As a reminder, we have a $250 million revolving credit facility that is committed through December 2017. Additionally, we have a $75 million accordion feature included in the agreement. The agreement bears interest at LIBOR plus a spread of 100 to 200 basis points, and we are currently paying LIBOR plus 125 basis points.

Flexible agreement permits us to operate our business, including doing acquisitions without bank approval as long as we are compliant with debt covenant. Those terms as well as our current availability of about $120 million, which doesn’t include the accordion, give us a lot of ability to get acquisitions done quickly.

We are fully compliant with all of our debt covenants and have plenty of room under our financial covenant, to do this Curry transaction and other acquisitions that may come about without any problem. Inventory is down about $2 million from March 2013. This is due in part to lower tire cost.

Total inventory turns for the rolling 12 months end June 2013 have improved slightly from year end. Additionally at June 29, 2013 was the non-fiscal year ‘13 acquisition stores, our total tire inventory was actually down about 11% as compared to same time last year. That concludes my formal remarks on the financial statement.

And with that I’ll now turn the call over to the operator for questions..

Thank you. (Operator Instructions) And we’ll take our first question from Bret Jordan with BB&T Capital Markets..

Hi. Good morning. I’ve couple of quick questions here. And one of them I guess if you in your markets your tire units were up 4%.

Do you have a feeling for how that compared to general higher traffic in the market that you serve? And then as a bigger sort of geographic outlook, if you are now in 22 states, did you see any regional dispersion on performance where some of the market that had historically wet Junes, like Philadelphia underperforming some of the Western markets or was there any noticeable difference regionally?.

Yes. On the tire units I think we are at or better than what we see within our markets and being guys that we are looking to buy, so that’s favorable. With regard to regional differences, we didn’t see significant regional differences.

June retail sales were weak generally weather certainly didn’t help that situation plus I frankly would have expected after running positive three comps for seven weeks have run six weeks of flat. So, I think that had an impact..

Okay and then I guess if you look at oil, oil is a category and tire starts deflating with the import mix.

Did your oil change pricing year-over-year meaningfully down? I think you’ve been promoting it $21.99 what was the prior, the year ago quarter for oil pricing?.

Overall it’s not down meaningfully. I think it might have ticked down slightly but not (inaudible) at all..

Okay. And then I guess one just housekeeping.

Could you give us some monthly comps and maybe some cadence as we come into July?.

Yeah. The monthly comp was up three in April, up one in May and flat in June..

Okay.

And I guess as we look at July I think the week around July 4th might have been soft industry-wide, but what if we say in concern?.

Yeah. I mean actually we didn’t have a bad week there. Yeah, I mean, things have been uneven. Again, we’ve now proven to be able to predict things on the sales side so we’ve had some uneven weeks there. Look this week is up mid-single digits. That mean you tell me what sales are going to be outside U.S. I’ll tell you what the results are going to be.

We are delivering on everything else and we’re working hard to bring customers in which we did in the first quarter with increased oil changes, where I think the tire units being up chose that folks are getting to a point that they need to replace some tires and we are – we’re working hard in a choppy environment?.

Well, alright. Thank you..

Thank you..

And we’ll take our next question from James Albertine with Stifel Nicolaus..

Great. Thanks for taking the question. Good morning.

Just wanted to focus on the M&SA side, just given the soft comp environment in certainly last six weeks of the quarter, and then as you noted the choppy July results, what are you seeing from I guess on the first time, the pipeline perspective or the number of deals, and the valuation secondly that you are seeing relatively to the deals that you are working on?.

Yeah, I think last time we had eight NDAs. We have seven now because we singed one of those. So, the pipeline at that level is very strong. And in terms of I think a choppy environment plays into that. So, I expect to see more acquisition opportunities there as we move forward.

And in terms of valuation, we’re being very careful with the valuation and we are within the parameters that we’ve been paying, 7 to 7.5 times EBITDA, 80% of sales. I would note in the last several transactions, we have been purchasing within those parameters, more of the real estate, which is a benefit on the valuation side to get more assets..

That’s very helpful. And then if I may ask a second question, on the implication – the conversion remains stubborn in the last quarter, I just wanted to get a sense for us consumers continue to differ items.

Can you just get into a little bit more granularity maybe by segment where you are seeing that? And then as sort of a related question, I wouldn’t imagine its typical sort of your core consumer, but are you seeing folks that at this point with significantly older vehicles perhaps opting to replace rather than repair when they get into the big ticket maintenances and repair category? Thanks..

Yes. On a category basis, really that choppiness for that deferral there is kind of across the board. On the replacement of vehicles, that’s always been a consideration. And I think if you take a look at our consumer what the data showing is that they are hanging on to their cars, and they are investing in those cars.

I think those consumers are having a tougher time right now and that is showing up in the choppiness in our sales, but I don’t think that those folks are going to find new cars and grow..

Okay..

Just as note, we continue to see the numbers for the percentage of vehicles that are 12 years old and older grow within our customer base and our traffic is out there..

Right. It doesn’t sound like there is any systematic change then as expeditiously..

I don’t see anything of that..

Great, okay. Well, I appreciate that and good luck in the coming quarters..

Thank you..

And we’ll take our next question from Rick Nelson with Stephens..

Thanks. Good morning.

John, the Curry acquisition looks like it had more of a service component to an 80% service, does this signal any change or is it higher to look at more service stores as opposed to tire stores?.

No. We have said in the past we are different there. Our multi-branding strategy allows us to have that kind of flexibility as we approach acquisition candidates and it allows us to get more deals done to create that store density that drives operating margins up, plus it’s in no way a shift to sign service stores as opposed to tire stores.

What we have said is because of the significant numbers of independent tire dealers we will have more that are out there. We will have more of our acquisitions probably four out of five being on the tire store side versus a service store side..

Okay, got you.

So, that would be true that seven NDAs are still more tire oriented?.

That’s right..

And just to follow up on the margin pressure you saw in the quarter, I understand acquisitions and lower margin tires weigh on that, if you could discuss on a competitive environment in the tire business what’s happening to pricing and margins and maybe looking at some of your legacy stores as opposed to the newer ones?.

Yes. With tire cost coming down, there is a bit of a downward bias in tire retail pricing. But as Cathy said excluding the acquisitions, our gross margin was flat for the quarter. And as I said I thought we discounted more in the quarter in particular on tires than we should have. And we are addressing that.

One of the things to remember as well on the acquisition side is those stores that we bought have a high concentration of tire sales, but they are also still coming up the spectrum and the integration. So, we always have a lower margin earlier in that integration. So, I expect that to be helped later in the year.

And I would certain – we certainly see margin opportunity as we move through the year as we address our discounting and as those integrations occur and the tire costs continue to come down..

Got you. Thanks a lot and good luck..

Sure. Thank you..

Thank you..

And we’ll take our next question from Scott Stember with Sidoti & Company..

Good morning..

Good morning..

Could you maybe talk about the tire performance between the two different types of formats that you have.

I’m talking more along the lines of the volumes, higher stores like tire warehouse versus the payments to tire?.

Sales wasn’t as significant difference between those formats if you’re talking about where the unit increase came from..

Right. And that’s what I was referring to..

Yes. Now there was nothing meaningful there..

Now the big adjustments Scott just in general is we’re getting more units now, but people continue to look for value and trade down to the private label category as we’re offering that value. We’re encouraged with the units.

We think at some point it levels off and the units will start approaching a comp number instead of a plus four, getting us a plus one..

Got you.

And last quarter you talked about the condition of the tires that are actually coming into your base, we haven’t seen any changes there, obviously they must still be in pretty rigid conditions, I imagine?.

Yeah. They are, they had less stride on them than they have in recent years. Same trend that we’ve been seeing and I think again without driving positive units in the quarter that’s a good thing and it certainly gives me confidence as we look at the opportunity versus the second half of the year, which has been weak for two years now.

I can’t imagine it’s going to be three years particularly if we get any kind a normalized level..

Okay. And just last on some of the higher margin funds your business like brake little bit softer in the quarter than we expect here.

Is there anything going on there and or is it just a function of the entire portfolio of products being affected by the lower June sales on the consumer?.

On those categories, again, we continue to drive those folks and with oil changes, those categories have been weak they were in the quarter. I think that again comes back to the consumer and the consumer being in a tough environment, what I will say is we had negative trends and exhaust and in (inaudible) control and things like that.

So, more favorable trends there, to me supports the fact that, we have a bunch of folks that are investing in older cars and keeping them.

Certainly exhaust and life are both categories that you only spend those hundreds of dollar on when you’re going to be keeping your vehicle, so that’s great results, but at least stable as opposed to any kind of a decline..

That’s great. Thanks a lot..

Thank you..

Thank you..

(Operator Instructions) And we will take our next question from Michael Montani with ISI Group..

Hi, guys. Good morning. Just wanted to ask about on the tire side, the 4% comp and then – I’m sorry, the 1% comp and the 4% unit increase.

Is the difference there basically all ASP compression or deflation or is it sort of 50-50 mix, can you just help us understand that?.

Yeah, it’s a good chunk of trading down and some average selling price compression. So, it’s a chunk of all..

Okay and can you update John now in terms of what your total tire purchase volume is versus what it might have been a year ago.

And then what percentage is looking like branded versus sort of private label?.

Yes. We are about $2 million. Now, we are nearly $2.8 million and the branded, the import tires have grown to the high 20s in terms of the percentage from the mid 20s last year..

And then just an update in terms of the savings that you are realizing, I think it’s now 15% run rate on the imported tires, can you provide an update on where branded is and are we mixing out in total then it’s sort of a high single-digit type improvement in purchase cost?.

Yeah. We have said in the past that branded was up 8%, and that we are still in that general range. Again, we are not going to talk too much about this. It’s pretty competitive information.

I expect margins to while in the second quarter will still be impacted by the bringing in the acquired stores higher tire mix, so gross margin to be impacted there somewhat in the third quarter, but margin is an absolute opportunity as we move through the year, because we will have more of these discounts actually coming through our cost..

Okay, great.

And just the last question I had was in terms of the competitive environment you touched on it a bit before, but when you think about getting into the September timeframe where you’ve historically done price increases with traffic now positive, do you actually feel like there is a decent chance you can get a price increase through again and what are you sort of seeing out there in terms of the outlook?.

Yes, I think you can take from our comments about managing or discounting and in that to be through our consistent approach of trying to collect (inaudible), so we will absolutely look at further price increase through in September, but we will wait until we get there to evaluate what to do there, we will see how the next month and a half lays out?.

Okay, great. Thanks. Good luck..

Thank you..

And we will take our next question from Peter Keith with Piper Jaffray..

Hi. Good morning everyone..

Good morning..

Just want to understand the revision to the full year earnings guidance, so clearly there is a little bit of a reduced compound look, would the margin characteristics, if you strip out what Curry’s with that, did your margin outlook at all change for the year?.

No. It hasn’t changed other than to account for some potential upside there that we have been describing..

I mean, we did we are calling for 1 to 3 and spend 2.5 to 4 if you just do the math of every 1% comp, it’s $0.07 and you are lowering everything by 1.5% on your estimate, the margin doesn’t change just sales are a little bit later than we might have anticipated after the start for the year being three..

Yes. And we’ve got, we are very pleased with where the acquisitions are and they came in, in the first quarter ahead of our plan. So, that also helps..

Okay. That’s helpful clarification..

Peter, if you look at the second quarter with 41 and 45 of 36 and then 0% to 2% comp, so zero, we said we start leveraging the business on the low end.

It kind of gives you an indication of what we think the acquisitions are going to do to get us from 36 to 41 and then you just do the math $0.07 per year and 1% comp, you move it up to 2% and that’s where 45 comes from..

Okay..

So, fairly consistent on everything with obviously proving our lack of ability to predict sales..

Okay. Well, kind of as a follow-up to that last comment, so if we look at the revised comp guidance, you’ve guided the quarter 0 to 2% you are currently at zero, so there is clearly potential for some acceleration that you are factoring in. Also for just the rest of the year, it also looks like you are baking in the potential for acceleration.

Can you give us some comfort on how that outlook comes together? Is it the tire pricing that you are going to annualize something or is just you think more normalized weather just help us understand where that acceleration might come from?.

Yes, it’s primarily the opportunity in the back half of the year that we see coming off of two very weak years. Again, we are driving positive oil change units right now. We’ve got positive tire units. We get a handle on pricing gears.

I see a real opportunity for unit increases to drive that positive comp in the second half of the year after two years of decline and the industry hasn’t seen that in decades, I can’t imagine it’s going be three..

Okay, thank you..

So, now that it’s important to us that we saw the tire units respond in the first quarter and that again gives me a lot of confidence looking at the back half of the year if we get some (inaudible)..

Okay. Just changing gears real quick on the acquisition front, you talked recently maybe just last quarter that you thought this current fiscal year will be an above average acquisition year, because some of the changes to the healthcare laws. So, the Affordable Healthcare Act employer mandate there was since pushed out a full year to 2015.

Would that change the acquisitions dynamic and maybe do you find sellers maybe less eager to sell this year as a result?.

Well, no one called after they heard the Treasury department’s announcement to tell me that they weren’t interested anymore. So, no, I think the weak environment that and the choppy environment that we are currently facing has been the primary issue.

In the long-term trend, these guys getting older and looking for other things to do, given that environment is where we’ll find most of the opportunity. So, I haven’t seen any impact from the healthcare mandates being pushed off for employers. And frankly, if the opportunities were there, we could certainly hit the right deals we were able to strike.

We could get to that 10% growth this year and a handle there from a management perspective..

Okay, great. Thanks a lot for that John and good luck to everyone for this coming quarter..

Thank you..

(Operator Instructions) And we’ll take our question from Gary Balter with Credit Suisse..

Thank you. One question which is the follow-up.

I don’t know and I joined the call a bit late, you may have discussed this, but could you talk about regionality whether some areas that were just significantly weaker and was some of that weather related?.

Yes. We saw the weakness in the back half of our quarter. More generally, weather certainly didn’t help much..

But given that it’s getting warmer, shouldn’t that be helping at this stage?.

Yes. Like we said we have proven our inability to predict the sales side, I certainly didn’t see six weeks flat coming after three weeks of positive comp.

I mentioned a little bit earlier this week is up mid-single digits, and we haven’t been able to predict it what we are focused on is continuing to bring customers in, and that’s why for us the oil change is so important and the fact that we drove some higher tire units is very favorable for us..

And just a follow-up like historically Monro would be able to put through price increases on a relatively consistent basis.

Is there a worry and I don’t know the competitive market very well, so it’s maybe a naïve question, but is there a worry that you are pricing yourself a little too high relative to either other franchise operations or other people trying to be in the business in some of these categories?.

Yes, certainly, we’ve never been the low price guy out there. We got attractive everyday prices on oil changes and entry level tires. We look to be competitive and slightly above a lot of our competitors are. And what we look at is traffic, and we typically we’ll run plus 2 to minus 2 traffic.

And that’s what we really gauge to determine whether we’re pushing too hard on the prices side. So, with the traffic as we’re seeing, what it tells me and of course and the weakness in sales, I mean it’s a consumer issue. Retail sales were weak in June. Weather played a small part of that.

And we have an opportunity in the back half of the year if we get some weather, plus really if we’re driving the traffic and I’m comfortable that we are here because we continue to drive folks in for oils, and that’s how we monitor the pricing. And we will continue to operate that way. Our margins are pretty good and that’s the way that we support..

We also have the benefit Gary of seeing the seven guys we are trying to buy plus the one guy we just bought, what they are doing in units and what they are doing in sales, which gives us some comfort that after 12 years we just been all of a sudden get stupid..

Okay.

Yeah, I would say (inaudible) by any means, but just maybe I don’t know if somebody outside players like a Wal-Mart or Steers is trying to drive some business and getting more aggressive, but it doesn’t seem like that’s going on?.

No, we don’t think that’s a case..

Okay. Thank you very much..

Thank you..

And that does conclude our question-and-answer session. I would now like to turn the conference back over to you speakers for any closing or additional remarks..

I just like to thank everyone for their time this morning. We continue to work hard to take advantage of the great opportunities that we have here and I look forward to talking with everyone about better numbers in October. Thanks. Have a great day..

And that does conclude our conference. Thank you for your participation..