Monro Muffler Brake (NASDAQ:MNRO) reported a fiscal first-quarter sales decline as lower customer traffic and consumer caution around higher-ticket repairs weighed on results, though management said its marketing, store operations and merchandising initiatives continued to advance.
Sales fell 4.6% to $287.1 million in the quarter, Chief Financial Officer Brian D’Ambrosia said. The decrease reflected a $9 million sales impact from the closure of 145 underperforming stores in the first quarter of fiscal 2026, along with a 1.7% decline in comparable-store sales at continuing locations.
“This was an undeniably difficult fiscal first quarter for Monro,” Fitzsimmons said, citing geopolitical tensions in the Middle East, higher oil prices and resulting pressure on customer spending and traffic across the company’s store network.
Traffic Pressure Offset by Higher Average Repair Orders
Management said the quarterly comparable-sales decline was driven by lower traffic, while customers deferred more expensive purchases such as tires and brakes and shifted toward lower-cost tire choices. D’Ambrosia said average ticket increased about 4%, while traffic declined by the mid-single digits.
Tire-category sales declined 1%, but tire unit volume was flat year over year. Fitzsimmons said the company believes it gained share in tier-one tires and in its overall tire category, supported by promotional activity and the addition of an opening-price-point tire option in tier four.
Monro also reported year-over-year comparable-store sales growth in batteries, alignments and front-end shops. Battery comparable sales rose 8% during the quarter, which management attributed to improvements in store stocking programs, front-of-shop presentations and the use of its ConfiDrive vehicle-inspection process.
Fitzsimmons said ConfiDrive, which provides customers with visual documentation of vehicle needs, has helped improve customer understanding and support average repair-order growth. The company also expanded a district-manager toolkit to roughly 340 locations from an initial 150 underperforming stores. The broader program now targets overall store-profit improvement opportunities rather than focusing only on gross margins.
Marketing Investment Continues Despite Sales Headwinds
Management said it maintained marketing investment during the quarter, even as sales weakened. Marketing costs increased $4.9 million year over year, while the company continued to refine its use of customer relationship management tools, artificial intelligence and machine learning to tailor customer outreach, timing and promotional offers.
The company increased use of pay-per-click advertising in markets where it identified customers with in-market demand for its products and services. Fitzsimmons said the combination of digital advertising targeted at new customer acquisition and CRM offers directed to existing customers helped support tire performance.
He cited South Florida as an example, where additional pay-per-click spending and changes to pricing offers for certain oil products led to a significant increase in units. Management said it is using the data generated by its marketing efforts to direct spending toward regions where it sees the greatest potential benefit.
Fitzsimmons said elevated gas, food and health-care costs have pressured some consumers’ budgets. In response, customers have bought fewer tires per transaction and have become more selective among tire options in tiers two through four, he said. He added that the company has seen some evidence of a shift back toward higher-tier tire purchases in recent months, which could support tire margins if it continues.
Margins, Earnings and Cash Flow
Gross margin declined 50 basis points from the prior-year period. D’Ambrosia said occupancy costs increased by roughly 90 basis points as a percentage of sales because of lower comparable sales, partially offset by a 40-basis-point improvement in technician labor costs. Material costs were flat year over year.
Total operating expenses fell to $96.7 million, or 33.7% of sales, from $113 million, or 37.5% of sales, a year earlier. The decline included lower store-closing costs, reduced expenses from previously closed stores and lower consulting costs related to the operational improvement plan. Those savings were partly offset by higher marketing and continuing-store costs, primarily front-shop labor.
Operating income was $3.7 million, compared with an operating loss of $6.1 million a year earlier. Adjusted operating income, a non-GAAP measure, was $2.2 million, compared with $14 million in the prior-year quarter. Net loss narrowed to $2.1 million, or $0.08 per diluted share, from a net loss of $8.1 million, or $0.28 per diluted share, a year earlier.
Cash used in operating activities was $30 million, largely due to the timing of payments that made accounts payable and accrued expenses a use of cash during the quarter. Capital expenditures totaled $8 million, principal payments on financing leases were $9 million, and dividends paid totaled $9 million.
At quarter-end, Monro had net bank debt of $99 million, about $261 million of availability under its credit facility, and approximately $10 million in cash and equivalents. The company exited six leases and sold four owned closed-store locations during the quarter, generating cumulative proceeds of $3 million. It said 37 closed stores remained with potential for monetization over the next several quarters.
Fiscal 2027 Outlook and Strategic Review
For fiscal 2027, Monro expects year-over-year comparable-store sales growth, primarily driven by its performance-improvement initiatives. It expects full-year gross margin to be consistent with fiscal 2026, reflecting continued cost inflation, and expects higher selling, general and administrative expenses as it invests in marketing. Capital expenditures are expected to be between $25 million and $35 million.
The company also continues to review strategic alternatives with Bank of America and Solomon Partners as financial advisers and legal advisers. Fitzsimmons said the review includes potential asset sales, refinancing, strategic acquisitions, operational improvements or a sale of the company. He said there is no deadline or definitive timeline for the process and no assurance it will result in a transaction or other outcome.
About Monro Muffler Brake (NASDAQ:MNRO)
Monro Muffler Brake (NASDAQ:MNRO) is a leading provider of undercar repair and maintenance services for light vehicles in the United States. The company’s core offerings include brake systems, exhaust systems, steering and suspension repairs, tire sales and service, oil and lube changes, wheel alignment, multi-point inspections, and state vehicle inspections. Monro serves both retail customers and fleet accounts, focusing on fast, reliable service and preventive maintenance to help extend vehicle life and safety.
Headquartered in Rochester, New York, Monro was originally founded in 1957 and has grown through a combination of organic expansion and strategic acquisitions.
