Monro(US:MNRO)2022-05-19 15:39Financial Data and Key Metrics Changes - Sales increased by 7.4% year-over-year to $328 million in Q4 2022, with same-store sales rising by 1.4% [22] - Gross margin decreased by 320 basis points to 31.9%, primarily due to increased technician headcount and wages, which impacted gross margin by 250 basis points [22] - Net income was $8.6 million, down from $11.8 million in the same period last year, with diluted earnings per share at $0.25 compared to $0.35 [27] Business Line Data and Key Metrics Changes - Comparable store sales in medium and larger stores increased by about 5% compared to fiscal 2020, while small and underperforming stores saw a decline of about 8% due to understaffing [10] - Staffing initiatives in over 150 smaller stores led to an 8% increase in comparable sales, indicating a significant turnaround [11] Market Data and Key Metrics Changes - April's comparable store sales were 3% lower than the previous year, but May showed a 3% increase on a larger sales base, indicating a positive trend [12] Company Strategy and Development Direction - The company announced the divestiture of its wholesale and tire distribution assets to focus on retail operations, which is expected to enhance service availability and pricing [14][15] - The divestiture is valued at approximately $105 million and is expected to close in June, allowing the company to return capital to shareholders through dividends and share repurchase programs [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about fiscal 2023, highlighting strong demand for products and services and the effectiveness of staffing strategies [19][33] - The company anticipates continued improvement in sales and productivity as it resolves understaffing issues in smaller stores [19] Other Important Information - The company generated $174 million in cash from operations during fiscal 2022 and has a solid financial position with a net bank debt to EBITDA ratio of 0.9 times [28][29] - The board approved a $0.02 increase in the cash dividend to $0.28 per share, marking the 17th increase since the dividend was first issued [16] Q&A Session Summary Question: How far are the gross margins below average for the 300 underperforming stores? - Management indicated that gross profit margins for these stores are similar to most stores, emphasizing the need to align capacity and productivity to drive sales [38] Question: What were the trailing sales for the tire distribution assets sold? - The sold assets generated about $115 million in sales for the trailing 12 months, and the sale is expected to be accretive to gross and operating margins [41] Question: How do you expect to manage parts sourcing after the divestiture? - The company will rely on third-party partners for parts and tire sourcing, aiming to improve service and pricing through these relationships [50][53] Question: What was the monthly comp performance for the quarter? - Monthly comps were up about 1% in January, up 5% in February, and down about 2% in March [56] Question: How does the company plan to achieve mid-single-digit comp growth? - Management believes that achieving mid-single-digit comp growth is possible as they focus on improving productivity and addressing the needs of underperforming stores [74]