Summary of Monro (MNRO) FY Conference Call - June 10, 2025 Company Overview - **Company**: Monro, Inc. (MNRO) - **Industry**: Automotive service and tire retail Key Highlights from Quarterly Results - **Comp Store Sales Growth**: Achieved a positive comp store sales growth of **2.8%** adjusted for the previous year's 53-week period [4][5] - **Traffic Trends**: Notable year-over-year increase in traffic starting in March, continuing into April and May [5][6] - **Gross Margin Pressure**: Experienced a **250 basis points** deleverage on gross margin due to extreme weather impacting store traffic and closures [5][6] - **Sales Momentum**: Continued mid-single-digit comp store sales growth in April and May, supported by improved traffic trends [6][10] Management Changes - **New CEO**: Peter Fitzsimmons appointed as CEO, focusing on a performance improvement plan to enhance operations and drive shareholder returns [12][13] - **Leadership Engagement**: Fitzsimmons has been actively engaging with senior leadership and visiting stores to assess opportunities [14][15] Store Closures - **Underperforming Stores**: Announced the closure of **145 underperforming stores**, which represent about **5%** of total sales, equating to approximately **$45 million** in sales reduction for FY 2026 [19][21] - **Closure Costs**: Expected closure costs between **$10 million to $15 million** in Q1 FY 2026 [22] Growth Strategy - **Acquisition Pause**: The company has been on pause regarding acquisitions for the past two years, focusing on internal improvements and operational efficiency [24][26] - **Future Growth**: Plans to leverage improvements for future unit and store location growth, although no specific timeline is set for this growth [26][28] Competitive Landscape - **Fragmented Industry**: The automotive service industry is highly fragmented, with a focus on local consumer experience [29][30] - **Competitive Advantages**: Monro leverages its scale for better pricing and service delivery, investing in technician training and promotional offerings [30][31] Consumer Offering Enhancements - **Tire Assortment Simplification**: Efforts to streamline tire offerings to improve in-store customer experience and operational efficiency [34][36] Tariff Implications - **Cost Increases**: Anticipates cost increases across major product categories due to tariffs, leading to potential price adjustments for consumers [37][38] - **Negotiation Efforts**: Mobilized a team to negotiate with suppliers to mitigate tariff impacts [38][41] Capital Investment and Cash Flow - **Investment Needs**: Capital investments projected between **$25 million to $35 million** for FY 2026, focusing on maintenance and technology projects [43][44] - **Cash Generation**: Expected to generate sufficient cash flow to meet capital allocation priorities, including **$40 million** in finance lease payments and a **$35 million** dividend [46][47] Conclusion - **Short-term Momentum**: The company is experiencing positive momentum and is focused on initiatives to support profitability and sales growth in FY 2026 [48][49]

Financial Data and Key Metrics Changes - Sales decreased by 4.9% to $295 million in the fourth quarter, primarily due to six fewer selling days compared to the previous year, resulting in a sales decrease of $18.9 million [22] - Comparable store sales increased by 2.8% but decreased by 3.6% when unadjusted for days [22] - Net loss was $21.3 million compared to net income of $3.7 million in the same period last year, with diluted loss per share at $0.72 compared to diluted earnings per share of $0.12 [25][26] Business Line Data and Key Metrics Changes - Tire units were up mid-single digits in the fourth quarter, driven by growth in units above 10% during March [22] - Gross margin decreased by 250 basis points compared to the prior year, primarily due to higher material costs and increased technician labor costs [23] Market Data and Key Metrics Changes - The average vehicle life of cars on the road is over 12.5 years, with vehicle miles traveled returning to pre-COVID levels [9] - The company gained tire market share in higher margin tiers during the quarter [22] Company Strategy and Development Direction - The company plans to close 145 underperforming stores, which generated approximately 5% of total sales in fiscal 2025, to improve profitability [11] - Focus areas for improvement include enhancing customer experience, driving profitable customer acquisition, and increasing merchandising productivity [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute the performance improvement plan and capitalize on positive industry trends [19] - The company does not expect immediate improvements but anticipates enhanced profitability and increased operating income during fiscal 2026 [19] Other Important Information - The company generated $132 million in cash from operations during fiscal 2025, with a strong financial position maintained [27] - The company expects to incur store closure costs of approximately $10 million to $15 million primarily during the first quarter of fiscal 2026 [29] Q&A Session Summary Question: Can you provide details on the gross margins and the impact of self-funded promotions? - The gross margin impact related to self-funded promotions includes tire promotions and everyday offers, with expectations for continued pressure on gross margins due to baseline cost increases and potential tariff impacts [36][37] Question: What is the strategy for customer acquisition and improving the Monro experience? - The company is reallocating marketing investments towards targeting repeat customers who appreciate a range of services, with a focus on understanding customer needs [38][39] Question: Can you break down the decline in gross margin in more detail? - The decline was primarily due to 160 basis points related to material costs and 80 basis points from technician labor costs, with some deleverage on fixed occupancy costs [46][47] Question: What are the dynamics between traffic and ticket for the quarter? - Store traffic was down low single digits while ticket was up mid-single digits, with positive trends observed in March and April [50] Question: What is the common denominator for the store closures? - The closures are spaced throughout the network, focusing on stores that are unlikely to produce the desired earnings profile [56][57] Question: What factors contributed to the recent improvement in performance? - The economic environment is favorable for automotive aftermarket services, with expectations for continued demand despite potential economic slowdowns [58][59]

Financial Data and Key Metrics Changes - Sales decreased by 4.9% to $295 million in Q4, primarily due to six fewer selling days compared to the previous year, resulting in a sales decrease of $18.9 million [22] - Comparable store sales increased by 2.8% but decreased by 3.6% when unadjusted for days [22] - Net loss was $21.3 million compared to net income of $3.7 million in the same period last year, with diluted loss per share at $0.72 compared to diluted earnings per share of $0.12 [25] Business Line Data and Key Metrics Changes - Tire units were up mid-single digits in Q4, driven by growth in units above 10% during March [22] - Gross margin decreased by 250 basis points year-over-year, primarily due to higher material costs and increased technician labor costs [23] Market Data and Key Metrics Changes - The average vehicle life of cars on the road is over 12.5 years, with vehicle miles traveled returning to pre-COVID levels [8] - The company gained tire market share in higher margin tiers during the quarter [22] Company Strategy and Development Direction - The company plans to close 145 underperforming stores, which generated approximately 5% of total sales in fiscal 2025, to improve profitability [11] - Focus areas for improvement include enhancing customer experience, driving profitable customer acquisition, and increasing merchandising productivity [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute the performance improvement plan and capitalize on positive industry trends [19] - The company expects to see year-over-year comparable store sales growth in fiscal 2026, driven by the improvement plan [27] Other Important Information - The company generated $132 million in cash from operations during fiscal 2025, maintaining a strong financial position [26] - The company expects to incur store closure costs of approximately $10 million to $15 million primarily during the first quarter of fiscal 2026 [28] Q&A Session Summary Question: Can you provide details on the gross margins and the impact of self-funded promotions? - Management indicated that self-funded promotions, including tire promotions, have been consistent and are expected to keep gross margins pressured due to baseline cost increases and potential tariff impacts [36][37] Question: What is the strategy for customer acquisition and improving the Monro experience? - Management is reallocating marketing investments towards targeting repeat customers who appreciate a range of services, aiming to attract higher value customers [39][40] Question: Can you break down the decline in gross margin in more detail? - The decline was attributed to 160 basis points related to material costs and 80 basis points due to technician labor costs, with some deleverage on fixed occupancy costs [47] Question: What are the dynamics between traffic and ticket in the quarter? - Store traffic was down low single digits while ticket was up mid-single digits, indicating a positive trend in recent months [50] Question: What is the common denominator for the store closures? - The closures are spaced throughout the network, focusing on stores that are unlikely to meet the desired earnings profile [57]