Monro, Inc. (NASDAQ: MNRO) Q4 2025 Earnings Call | 05/28/2025

Monro, Inc. Q4 and Full-Year Fiscal 2025 Earnings Summary

Monro, Inc. (Monro) reported its financial results for the fourth quarter and full fiscal year 2025, outlining a comprehensive performance improvement plan aimed at enhancing profitability and shareholder returns. The company acknowledged that while results are not yet where they want them to be, there are encouraging signs and clear opportunities for growth.

Key Highlights & Strategic Focus:

Peter Fitzsimmons, President and CEO, emphasized Monro's strengths:

• Durability and Scale: Positioned as a leading player in a fragmented industry with significant scale advantages.
• Strong Industry Fundamentals: Continued growth of vehicles on the road (over 280 million in the U.S.), increased vehicle miles traveled, an average vehicle life exceeding 12.5 years, and a shift from DIY to "do it for me" services.
• Financial Strength: Consistent cash generator with ample liquidity, a solid balance sheet, and low leverage.

Monro has identified four key areas for improvement:

1. Closing Unprofitable Stores: A review identified 145 underperforming stores (representing approximately 5% of fiscal 2025 sales) for closure during Q1 fiscal 2026. This is expected to have limited sales impact but deliver meaningful profitability improvement.
2. Improving Customer Experience and Selling Effectiveness: Addressing inconsistent service execution, scheduling, communication, and service quality to enhance the customer journey and unlock sales value. The Confidrive digital courtesy inspection remains a key component.
3. Driving Profitable Customer Acquisition and Activation: Reallocating marketing spend to target higher-value, more profitable customers based on analysis showing these customers deliver 25 times more profit than the lowest tier. Early test results are encouraging.
4. Increasing Merchandising Productivity & Mitigating Tariff Risk: Simplifying the core tire assortment to better align with customer demand and strengthen strategic partnerships with manufacturers. The company is also evaluating the full impact of potential tariffs on major product categories and negotiating with suppliers to mitigate cost increases, which may lead to price adjustments for consumers.

Financial Performance (Q4 Fiscal 2025):

• Sales: Decreased 4.9% to $295 million, primarily due to six fewer selling days.
• Comparable Store Sales (Adjusted for Days): Increased 2.8%, with a strong rebound to 8% growth in March. Unadjusted, comps decreased 3.6%.
• Tire Units: Up mid-single digits, with over 10% growth in March, and market share gains in higher-margin tiers.
• Gross Margin: Decreased 250 basis points year-over-year, mainly due to higher material costs (mix shift to Tier 3 tires, self-funded promotions) and increased technician labor costs (wage inflation).
• Operating Loss: $23.8 million (negative 8.1% of sales), primarily due to $20.9 million in store impairment costs. This compares to an operating income of $10.3 million in Q4 FY2024.
• Net Loss: $21.3 million, compared to a net income of $3.7 million in Q4 FY2024.
• Diluted Loss Per Share: $0.72. Adjusted diluted loss per share (non-GAAP) was $0.09, compared to $0.21 in Q4 FY2024.
• Cash Flow: Generated $132 million from operations in fiscal 2025, including $43 million in working capital reductions.
• Liquidity: Ended Q4 with net bank debt of $40 million, $509 million availability under its credit facility, and $21 million in cash and cash equivalents.

Fiscal Year 2026 Outlook:

• Guidance: Monro is not providing full fiscal 2026 guidance due to tariff uncertainties.
• Comparable Store Sales: Expects year-over-year growth, driven by the improvement plan and potential tariff-related price increases. Preliminary Q1 fiscal 2026 comps are up approximately 7% (first eight weeks).
• Sales Impact from Closures: Store optimization plan expected to reduce total sales by approximately $45 million.
• Gross Margin: Expected to remain pressured due to baseline cost inflation and tariff exposure, particularly in Q1 due to tough comparisons. Benefits from store closures and operational improvements are anticipated to partially offset these pressures.
• Adjusted Diluted EPS: Expected to see a year-over-year improvement in fiscal 2026.
• Store Closure Costs: Anticipates $10 million to $15 million in costs, primarily in Q1 fiscal 2026.
• Capital Expenditures: Expected to be between $25 million and $35 million.
• Cash Flow: Anticipates sufficient operating cash flow to maintain a strong financial position and fund all capital allocation priorities, including dividends.