Monro(MNRO) - 2026 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited financial statements and management's analysis for the quarter ended June 28, 2025 Item 1. Financial Statements (Unaudited) Monro, Inc. reported a net loss of $8.1 million for the quarter ended June 28, 2025, driven by store closure costs and a reversal to negative operating cash flow Consolidated Balance Sheets Total assets decreased to $1.605 billion as of June 28, 2025, primarily due to reduced cash and reclassification of assets held for sale Consolidated Balance Sheet Highlights (in thousands) | Account | June 28, 2025 | March 29, 2025 | | :--- | :--- | :--- | | Assets | | | | Cash and equivalents | $7,801 | $20,762 | | Total current assets | $254,802 | $277,399 | | Assets held for sale | $13,043 | $— | | Total assets | $1,605,060 | $1,641,823 | | Liabilities & Equity | | | | Total current liabilities | $505,963 | $524,290 | | Total liabilities | $1,000,169 | $1,021,062 | | Total shareholders' equity | $604,891 | $620,761 | Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income The company reported a net loss of $8.1 million for the quarter, despite a 2.7% sales increase, due to a significant surge in OSG&A expenses Q1 Performance vs. Prior Year (in thousands, except per share data) | Metric | Q1 FY2026 (ended June 28, 2025) | Q1 FY2025 (ended June 29, 2024) | | :--- | :--- | :--- | | Sales | $301,035 | $293,182 | | Gross Profit | $106,906 | $109,185 | | Operating (Loss) Income | $(6,075) | $13,246 | | Net (Loss) Income | $(8,050) | $5,863 | | Diluted (Loss) Earnings Per Share | $(0.28) | $0.19 | Consolidated Statements of Cash Flows Operating cash flow reversed to a $1.9 million use of cash, leading to a $13.0 million decrease in total cash and equivalents for the quarter Summary of Cash Flows (in thousands) | Activity | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | | :--- | :--- | :--- | | Cash (used for) provided by operating activities | $(1,939) | $25,638 | | Cash used for investing activities | $(2,366) | $(4,232) | | Cash used for financing activities | $(8,656) | $(9,302) | | (Decrease) increase in cash and equivalents | $(12,961) | $12,104 | | Cash and equivalents at end of period | $7,801 | $18,665 | Notes to Consolidated Financial Statements Notes detail a store closure plan, completion of tire divestiture, credit facility amendment, and significant consulting fees for operational improvements - The company approved and executed a plan to close 145 underperforming stores during the first quarter of fiscal 2026, recording $14.8 million in net store closing costs[32] - All outstanding payments from the 2022 divestiture of wholesale tire and distribution operations to ATD have been fully collected as of June 28, 2025[35] - On May 23, 2025, the company entered into a Fifth Amendment to its Credit Facility, which reduced the facility from $600 million to $500 million and provided temporary relief on certain financial covenants[57][61] - The company incurred $5.4 million in expenses related to consulting agreements with AlixPartners and its affiliate APS for services including an Operational Improvement Plan and the provision of an interim CEO[81] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 2.7% sales increase driven by comparable store sales, a GAAP net loss, and adjustments for store closures and consulting fees - Key recent developments include amending the credit facility for covenant flexibility, closing 145 underperforming stores, and engaging AlixPartners for an Operational Improvement Plan[83][84][85] Q1 FY2026 Financial Summary | Metric | Value | Note | | :--- | :--- | :--- | | Sales Increase | 2.7% | Driven by comparable store sales, offset by closures | | Comparable Store Sales Increase | 5.7% | - | | Operating Loss (GAAP) | $(6.1) million | - | | Adjusted Operating Income (Non-GAAP) | $14.0 million | Excludes store closing & consulting costs | | Net Loss (GAAP) | $(8.1) million | - | | Adjusted Net Income (Non-GAAP) | $7.0 million | - | | Diluted Loss Per Share (GAAP) | $(0.28) | - | | Adjusted Diluted EPS (Non-GAAP) | $0.22 | Flat YoY | Analysis of Results of Operations Sales increased 2.7% driven by comparable store growth, but gross profit margin declined due to higher costs, and OSG&A expenses surged from store closures and consulting fees Comparable Store Product Category Sales Change (Q1 FY26 vs Q1 FY25) | Product Category | Sales Change Q1 FY26 | Sales Change Q1 FY25 | | :--- | :--- | :--- | | Front end/shocks | +26% | -15% | | Batteries | +9% | -6% | | Brakes | +9% | -13% | | Tires | +4% | -8% | | Maintenance service | +4% | -10% | - Gross profit margin decreased by 170 basis points, primarily driven by increased technician labor costs (-170 bps) and material costs (-120 bps), which were partially offset by leverage on fixed occupancy costs (+120 bps)[96][97] - The $17.0 million increase in OSG&A expenses was mainly due to $14.6 million in net store closing costs and $4.7 million in consulting costs related to the Operational Improvement Plan[98][100] Non-GAAP Financial Measures Non-GAAP measures adjust GAAP operating loss of $6.1 million to an operating income of $14.0 million by excluding store closing and consulting costs Reconciliation of GAAP Operating (Loss) Income to Adjusted Operating Income (in thousands) | Description | Q1 FY2026 (ended June 28, 2025) | Q1 FY2025 (ended June 29, 2024) | | :--- | :--- | :--- | | Operating (loss) income (GAAP) | $(6,075) | $13,246 | | Store closing costs, net | 14,816 | 181 | | Consulting costs related to the Operational Improvement Plan | 4,722 | — | | Transition costs related to back-office optimization | 571 | 597 | | Store impairment charges | — | 520 | | Corporate headquarters relocation costs | — | 125 | | Adjusted operating income (Non-GAAP) | $14,034 | $14,669 | Analysis of Financial Condition The company expects to fund operations via cash flow and credit facility, projecting $25-$35 million in capital expenditures, while managing a $251.2 million working capital deficit - Expected capital expenditures for fiscal 2026 are between $25 million and $35 million[112] - As of June 28, 2025, the company had $7.8 million in cash and equivalents and $398.4 million available under its Credit Facility[116] - The working capital deficit increased to $251.2 million, a situation influenced by extended payment terms with suppliers and managed through a voluntary supply chain finance program[115] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure on floating-rate debt, with a 100 basis point SOFR change impacting annual interest expense by $0.7 million - A 100 basis point change in the SOFR interest rate would impact annual interest expense by approximately $0.7 million, based on the debt level at June 28, 2025[134] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the most recent fiscal quarter[137] - No changes occurred in the company's internal control over financial reporting during the quarter ended June 28, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[138] PART II. OTHER INFORMATION This section provides information on legal proceedings, exhibits filed, and official signatures for the report Item 1. Legal Proceedings The company is involved in various legal proceedings, but management does not anticipate a material adverse impact on financial condition or operations - The company is party to various legal proceedings incidental to its business, but believes the ultimate resolution will not have a material adverse impact[140] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including credit agreement amendments and Sarbanes-Oxley certifications - Key exhibits filed include Amendment No. 5 to the Credit Agreement and certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act[142] Signatures The Form 10-Q was signed on July 30, 2025, by the company's Principal Executive Officer and Principal Financial Officer - The Form 10-Q was signed on July 30, 2025, by the company's Principal Executive Officer and Principal Financial Officer[146]