Monro(US:MNRO)2025-10-29 13:32Financial Data and Key Metrics Changes - Sales decreased by 4.1% to $288.9 million in the second quarter, primarily due to the closure of 145 underperforming stores, partially offset by a 1.1% increase in comparable store sales from continuing locations [16][21] - Adjusted diluted earnings per share increased to $0.21 from $0.17 in the prior year [18][19] - Gross margin expanded by 40 basis points to 35.7%, driven by lower occupancy costs and material costs as a percentage of sales [14][16] Business Line Data and Key Metrics Changes - Comparable store sales growth was reported for three consecutive quarters, with a 1.1% increase in the second quarter [13][28] - Tire units were down mid-single digits, but the company believes it outperformed the industry [16][46] Market Data and Key Metrics Changes - Preliminary October comparable store sales were down 2%, indicating some softness in consumer demand [14][28] - The company expects to deliver positive comparable store sales in fiscal 2026 despite recent softness [14][21] Company Strategy and Development Direction - The company is focusing on four key areas for performance improvement: customer acquisition, store experience, merchandising productivity, and real estate disposition [4][10] - A new marketing leader has been hired to enhance marketing strategies and execution [8][10] - The company is developing an updated tire assortment strategy to drive incremental sales [10][11] Management's Comments on Operating Environment and Future Outlook - Management noted that the lower-income consumer is feeling pressure, but the services provided are essential and cater to all economic levels [41][42] - The company remains optimistic about the opportunities ahead and believes it is well-positioned to capitalize on positive industry trends [23][73] Other Important Information - The company generated $30 million in cash from operations during the first half of fiscal 2026 [20] - The company expects to spend $25 million to $35 million on capital expenditures [22] Q&A Session Summary Question: Discussion on price contribution versus car counts and expectations for price in the second half - In the quarter, traffic was down mid-single digits while ticket prices were up mid-single digits, resulting in a net increase of 1% overall [26][28] Question: Inquiry about gross margin improvement drivers - Gross margins increased by 40 basis points, driven by higher comp sales and benefits from store closures, with material costs improving by 50 basis points [38][39] Question: Expectations on working capital and risk spread - There have been no recent changes related to the risk spread in the working capital program [30][31] Question: Insights on consumer softness and trade downs - The lower-income consumer is under pressure, but the company offers services that cater to all economic levels [41][42] Question: Expectations for operating expenses in the second half - Operating expenses are expected to run above Q2 levels, closer to flat compared to the prior year [50][51] Question: Safety of the dividend and capital allocation - The company believes it can fund the dividend alongside other capital allocation priorities, maintaining a conservative balance sheet [66][68]