Monro, Inc. (MNRO) Bundle
Understanding Monro, Inc. (MNRO) Revenue Streams
Understanding Monro, Inc.’s Revenue Streams
Monro, Inc. generates revenue primarily through its automotive services, including tire replacement and related services, as well as the sale of automotive parts. The following breakdown outlines the key revenue sources and trends for the fiscal year 2024.
Revenue Breakdown by Source
| Revenue Source | Three Months Ended September 28, 2024 (thousands) | Three Months Ended September 23, 2023 (thousands) | Six Months Ended September 28, 2024 (thousands) | Six Months Ended September 23, 2023 (thousands) |
|---|---|---|---|---|
| Tires | $141,514 | $148,356 | $276,927 | $296,246 |
| Maintenance Services | $83,075 | $90,233 | $166,135 | $183,146 |
| Brakes | $40,643 | $46,241 | $81,880 | $93,839 |
| Steering | $24,981 | $25,998 | $49,840 | $54,361 |
| Batteries | $6,285 | $5,469 | $10,087 | $9,707 |
| Exhaust | $4,513 | $5,139 | $8,900 | $10,355 |
| Franchise Royalties | $380 | $655 | $804 | $1,405 |
| Total Revenue | $301,391 | $322,091 | $594,573 | $649,059 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate indicates a decline in sales:
- For the three months ended September 28, 2024, revenue decreased by 6.4% compared to the same period in 2023.
- For the six months ended September 28, 2024, revenue decreased by 8.4% compared to the same period in 2023.
Contribution of Different Business Segments to Overall Revenue
In the three months ended September 28, 2024, the revenue distribution by product category was as follows:
- Tires: 47%
- Maintenance Services: 28%
- Brakes: 14%
- Steering: 8%
- Batteries: 2%
- Other: 1%
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Decrease in comparable store sales by 5.8% for the three months ended September 28, 2024.
- Sales of batteries increased significantly, with a growth of 20% for the three months ended September 28, 2024.
- Overall service revenue was impacted by lower store traffic and broader economic pressures affecting consumer demand.
The revenue from tire sales, which constitutes the largest segment of total sales, faced challenges due to a decrease in demand, contributing to the overall decline in revenue for the company during this period.
As of September 28, 2024, the total revenue reflected the ongoing economic environment's impact on consumer behavior and spending patterns within the automotive service sector.
A Deep Dive into Monro, Inc. (MNRO) Profitability
A Deep Dive into Monro, Inc.'s Profitability
Gross Profit: For the three months ended September 28, 2024, gross profit was $106,377 thousand, compared to $114,973 thousand for the same period in 2023, representing a decrease of 7.5%. For the six months ended September 28, 2024, gross profit was $215,563 thousand, down 6.0% from $229,368 thousand in the previous year.
Gross Profit Margin: The gross profit margin for the three months ended September 28, 2024, was 35.3%, down from 35.7% in the prior year. For the six-month period, the gross profit margin improved to 36.3%, compared to 35.3% in the same period last year.
Operating Profit
Operating Income: The operating income for the three months ended September 28, 2024, was $13,202 thousand, significantly lower than $22,355 thousand for the same period in 2023, marking a decline of 40.9%. For the six months ended September 28, 2024, operating income was $26,449 thousand, down 33.4% from $39,704 thousand in the previous year.
Operating Margin: The operating margin for the three months ended September 28, 2024, was 4.4%, compared to 6.9% in the previous year. For the six-month period, the operating margin decreased to 4.4% from 6.1%.
Net Profit
Net Income: For the three months ended September 28, 2024, net income was $5,647 thousand, down from $12,872 thousand in the previous year, reflecting a 56.1% decline. For the six months ended September 28, 2024, net income was $11,510 thousand, compared to $21,701 thousand in the same period last year.
Net Profit Margin: The net profit margin for the three months ended September 28, 2024, was 1.9%, down from 4.0% in the previous year. For the six-month period, the net profit margin was 1.9%, compared to 3.3% in the prior year.
Trends in Profitability Over Time
The following table summarizes the profitability metrics over the last two fiscal years:
| Metric | Q2 FY 2024 | Q2 FY 2023 | Change (%) |
|---|---|---|---|
| Gross Profit ($000) | $106,377 | $114,973 | -7.5% |
| Gross Margin (%) | 35.3% | 35.7% | -0.4% |
| Operating Income ($000) | $13,202 | $22,355 | -40.9% |
| Operating Margin (%) | 4.4% | 6.9% | -2.5% |
| Net Income ($000) | $5,647 | $12,872 | -56.1% |
| Net Margin (%) | 1.9% | 4.0% | -2.1% |
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry average gross profit margin for automotive services is approximately 36%. The company is slightly below this average, indicating potential areas for improvement in cost management. The operating margin industry average is around 8%, while the company's current margin is 4.4%, suggesting underperformance in operational efficiency relative to peers.
Analysis of Operational Efficiency
The operational efficiency can be assessed through the following metrics:
- Cost of Sales: For Q2 FY 2024, the cost of sales was $195,014 thousand, down 5.8% year-over-year.
- Operating, Selling, General and Administrative Expenses (OSG&A): For Q2 FY 2024, total OSG&A expenses were $93,175 thousand, a marginal increase of 0.6% compared to the previous year.
- Technician Labor Costs: Decreased as a percentage of sales due to improved labor productivity.
Overall, the trends indicate challenges in maintaining profitability margins while operational efficiency shows mixed results. The company must focus on cost management strategies to enhance profitability metrics moving forward.
Debt vs. Equity: How Monro, Inc. (MNRO) Finances Its Growth
Debt vs. Equity: How Monro, Inc. Finances Its Growth
As of September 28, 2024, Monro, Inc. reported total long-term debt of $62.0 million, which had decreased from $102.0 million as of March 30, 2024. The company also had a working capital deficit of $234.7 million, an increase from $201.9 million. In terms of short-term debt, Monro had no amounts due within the next 12 months under its Credit Facility.
The debt-to-equity ratio for Monro, Inc. as of September 28, 2024, stands at approximately 0.09, which is significantly lower than the industry average of 0.5. This indicates a conservative approach to leveraging and a strong reliance on equity financing.
Recent debt activity includes a $600 million revolving credit facility established in April 2019, which was amended in November 2022 to extend its term to November 10, 2027. The interest rate for this facility is now based on 0.10% over the Secured Overnight Financing Rate (SOFR), a change from the previously utilized LIBOR. Monro's credit rating reflects this conservative debt management strategy, contributing to its ability to secure financing at manageable rates.
Monro balances its financing strategy by utilizing both debt and equity. The company paid dividends totaling $17.4 million during the six months ended September 28, 2024, reflecting a commitment to returning value to shareholders while managing its debt levels. The capital expenditures for fiscal 2025 are projected to be between $25 million and $35 million, indicating a focus on growth through strategic investments.
| Financial Metric | Amount as of September 28, 2024 | Amount as of March 30, 2024 |
|---|---|---|
| Long-term Debt | $62.0 million | $102.0 million |
| Working Capital Deficit | $234.7 million | $201.9 million |
| Debt-to-Equity Ratio | 0.09 | N/A |
| Dividends Paid (6 months) | $17.4 million | N/A |
| Projected Capital Expenditures (FY 2025) | $25-$35 million | N/A |
Assessing Monro, Inc. (MNRO) Liquidity
Assessing Monro, Inc.'s Liquidity
Current Ratio: As of September 28, 2024, the current ratio was 0.75, indicating that the company has $0.75 in current assets for every $1.00 of current liabilities.
Quick Ratio: The quick ratio for the same period was 0.25, reflecting the company's ability to meet its short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
As of September 28, 2024, Monro, Inc. reported a working capital deficit of $234.7 million, which is an increase from a deficit of $201.9 million as of March 30, 2024. This change is primarily attributed to the company’s supply chain finance program.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 28, 2024 | $176.0 | $410.7 | ($234.7) |
| March 30, 2024 | $206.0 | $407.9 | ($201.9) |
Cash Flow Statements Overview
For the six months ended September 28, 2024, Monro, Inc. demonstrated strong cash flow from operating activities amounting to $88.2 million, compared to $98.3 million for the same period in the previous year.
| Cash Flow Activity | Six Months Ended September 28, 2024 (in millions) | Six Months Ended September 23, 2023 (in millions) |
|---|---|---|
| Cash Provided by Operating Activities | $88.2 | $98.3 |
| Cash Provided by Investing Activities | $4.6 | ($6.7) |
| Cash Used for Financing Activities | ($78.5) | ($87.5) |
| Net Increase in Cash and Equivalents | $14.3 | $4.2 |
Potential Liquidity Concerns or Strengths
As of September 28, 2024, the company had $20.9 million in cash and equivalents. Additionally, there was $507.9 million available under the Credit Facility, which provides a significant buffer for liquidity needs. However, the ongoing working capital deficit raises concerns about the company's short-term financial health.
Monro, Inc. has significant operating lease commitments totaling $247.5 million due over the next several years, which could impact future liquidity if cash flows do not improve.
Is Monro, Inc. (MNRO) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will analyze key financial ratios and stock performance metrics.
Price-to-Earnings (P/E) Ratio
As of the latest reports, the trailing twelve months (TTM) P/E ratio is 25.6. The forward P/E ratio is projected at 15.7.
Price-to-Book (P/B) Ratio
The current P/B ratio stands at 2.3, indicating how the market values the company relative to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is recorded at 12.4, which provides insight into the valuation of the company's operating performance.
Stock Price Trends
Over the past 12 months, the stock price has experienced a decline of 20%. The stock was priced at approximately $35 a year ago and is currently trading at $28.
Dividend Yield and Payout Ratios
The company has a dividend yield of 4.0% based on a quarterly dividend of $0.28 per share. The payout ratio is approximately 50%.
Analyst Consensus
Analyst consensus on the stock valuation is currently a Hold. Out of 10 analysts, 4 recommend a Buy, 5 recommend a Hold, and 1 recommends a Sell.
| Metric | Value |
|---|---|
| P/E Ratio (TTM) | 25.6 |
| P/E Ratio (Forward) | 15.7 |
| P/B Ratio | 2.3 |
| EV/EBITDA Ratio | 12.4 |
| 12-Month Stock Price Change | -20% |
| Current Stock Price | $28 |
| Dividend Yield | 4.0% |
| Quarterly Dividend | $0.28 |
| Payout Ratio | 50% |
| Analyst Consensus | Hold |
| Buy Recommendations | 4 |
| Hold Recommendations | 5 |
| Sell Recommendations | 1 |
Key Risks Facing Monro, Inc. (MNRO)
Key Risks Facing Monro, Inc. (MNRO)
Monro, Inc. faces several internal and external risks that may impact its financial health. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The automotive service industry is highly competitive, with various players vying for market share. The company's sales decreased by 6.4% in the three months ended September 28, 2024, compared to the same period in the previous year, primarily due to lower store traffic and comparable store sales, which fell by 5.8%.
Regulatory Changes
Changes in environmental, consumer protection, and labor laws can significantly impact operational costs. The company is subject to various regulations that may result in increased compliance costs or operational restrictions. As of September 28, 2024, the effective income tax rate was 30.9%, up from 26.8% in the previous year.
Market Conditions
The broader economic environment poses risks, including inflation and labor availability, which have been constrained. The inflation rate has affected consumer spending, potentially leading to a decline in demand for the company’s services. The company reported a net income of $5.6 million for the second quarter of 2025, down from $12.9 million in the same quarter of the previous year.
Operational Risks
Operational risks include the management of store closures and the associated impairment charges, which amounted to $1.0 million in the most recent quarter. The company closed 12 stores in the last quarter and has seen a reduction of 16 stores in the last six months.
Financial Risks
Financial risks are highlighted by the company's net interest expense, which was $5.1 million for the three months ended September 28, 2024. This represents an increase from $4.8 million in the prior year. The weighted average interest rate increased by approximately 60 basis points compared to the previous year.
Strategic Risks
The company has plans for growth through acquisitions and new store openings, which require significant capital investment. Capital expenditures are expected to be between $25 million and $35 million in fiscal 2025. The company also has lease commitments totaling $477.4 million through October 2040.
Mitigation Strategies
To mitigate these risks, Monro, Inc. is focusing on improving operational efficiency and managing costs effectively. The company is implementing a supply chain finance program to enhance working capital management, which has contributed to a working capital deficit of $234.7 million as of September 28, 2024.
| Risk Factor | Current Status | Financial Impact |
|---|---|---|
| Sales Decrease | 6.4% decline | Net income: $5.6 million |
| Store Closures | 12 stores closed | Impairment charges: $1.0 million |
| Net Interest Expense | $5.1 million | Increased interest rate: 60 basis points |
| Lease Commitments | $477.4 million | Long-term financial obligation |
| Capital Expenditures | $25 million - $35 million | Investment in growth initiatives |
Future Growth Prospects for Monro, Inc. (MNRO)
Future Growth Prospects for Monro, Inc.
Key Growth Drivers
Monro, Inc. is positioned to leverage several growth drivers to enhance its market presence and financial performance. These include:
- Product Innovations: The company has noted a 20% increase in battery sales in the three months ended September 28, 2024, compared to the same period in 2023.
- Market Expansions: Expansion into new geographic areas and increasing store count are vital for growth. Monro had a total of 1,284 stores at the beginning of the period, down from 1,299 in the prior year.
- Acquisitions: Strategic acquisitions remain a focus, as evidenced by ongoing evaluations to acquire retail stores to drive growth.
Future Revenue Growth Projections and Earnings Estimates
Analysts project that revenue growth may be modest, with expectations of a 6.4% decline in sales for the three months ended September 28, 2024, totaling $301.4 million, down from $322.1 million in the prior year. For the six months ended September 28, 2024, revenue was $594.6 million, a decrease of 8.4% from $649.1 million.
Earnings per share (EPS) forecasts indicate a decline, with diluted EPS reported at $0.18 for the latest quarter, down 55% from $0.40 in the same quarter last year.
Strategic Initiatives or Partnerships
Monro has engaged in several strategic initiatives aimed at driving future growth:
- Back-Office Optimization: Transition costs related to back-office optimization were $1.15 million for the six months ended September 28, 2024, which is expected to streamline operations and reduce costs in the long term.
- Supply Chain Enhancements: The company has implemented a supply chain finance program that improved cash flow by $67.5 million.
Competitive Advantages
Monro, Inc. maintains several competitive advantages that position it favorably for growth:
- Brand Recognition: Established brand presence in the automotive service industry supports customer retention and acquisition.
- Diverse Service Offerings: A broad range of services, including tire sales, maintenance, and repair, enhances customer reach.
- Operational Efficiency: Improvements in labor productivity have led to a decrease in technician labor costs as a percentage of sales, which enhanced gross profit margins.
| Metric | Q2 2025 | Q2 2024 | Change |
|---|---|---|---|
| Sales (in millions) | $301.4 | $322.1 | -6.4% |
| Net Income (in millions) | $5.6 | $12.9 | -56.5% |
| Diluted EPS | $0.18 | $0.40 | -55.0% |
| Store Count | 1,284 | 1,299 | -1.2% |
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Article updated on 8 Nov 2024
Resources:
- Monro, Inc. (MNRO) Financial Statements – Access the full quarterly financial statements for Q2 2025 to get an in-depth view of Monro, Inc. (MNRO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Monro, Inc. (MNRO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.