Q1 2022 Monro Inc Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to of Monroe, Inc. Earnings Conference call for the first quarter of fiscal 2020..2 at this time all participants are in a listen only mode. Later, we will conduct.
And the answer session and instructions will follow at that time, if anyone should require assistance during the call. Please press star zero on your telephone keypad and and as and as a reminder, ladies and gentlemen at this conference call is being recorded and may not be reproduced in whole or in part without permission from the company.
I would now like to introduce Ms Maria.
At a quite of Holland Executive Vice President and Chief Legal Officer at Monroe. Please go ahead.
Thank you Hello, everyone and thank you for joining us on this morning's call before we get started please note that as part of this call. We will be referencing of presentation that is available on the investors section of our website.
At corporate Dot Monro dot com forward slash investors forward slash investor Dash resources.
If I could draw your attention to the safe Harbor statement on slide 2 I'd like to remind participants at our presentation includes some forward looking statements about.
About monroe's future performance.
Actual results may differ materially from those suggested by our comments today.
The most significant factors that could affect future results are outlined and monroe's filings with the SEC and in our earnings release and include the significant uncertainty relating to the duration and scope.
And of the COVID-19, pandemic and its impact on our customers' executive officers and employees.
The company disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise except as required by.
Law and.
Additionally on today's call management's statements include a discussion of certain non-GAAP financial measures, which are intended to supplement and not to be substitutes for comparable GAAP measures.
Reconciliations of such supplemental information to the comparable GAAP measures will be included as part of today's.
And presentation and in our earnings release.
With that I'd like to turn the call over to our President and Chief Executive Officer, Mike Broderick, Mike. Thank you Maureen and good morning, everyone. Thanks for joining us.
We had a great start to the new fiscal year with top line performance of both pre pandemic levels.
We delivered double digit comparable store sales growth across all of our regions and categories.
Driven by strong demand and progress on our in store operational excellence initiatives and consistent execution across the entire organization.
Over the last few months I've enjoyed diving into the <unk>.
With the support of our senior leadership team and getting to know our teammates better I would like to thank them for their outstanding efforts and continued dedication to our customers.
Turning to slide 3 while we are not completely out of the Covid tunnel, we are encouraged by our strong.
Business with first quarter performance and our outlook for the remainder of the year.
Our first quarter performance reflects higher traffic and higher average ticket sales compared to the same period last year.
Importantly, we exited the first quarter with strong momentum and our first second quarter of fiscal second.
And quarter to date with comps up approximately 15% and fiscal July compared to comps down 12% and the same period last year.
This represents an acceleration from June and we are encouraged to see comparable store sales levels trending above.
Covid performance.
We're seeing continued improvements and vehicle miles driven as more consumers start to reengage and their daily activities and commute miles return.
We're particularly encouraged to see oil change customers starting to migrate back to our full service offering.
Additionally, consumers are holding onto their cars longer.
As evidenced by lower new car sales, which means they continue to invest and their vehicles.
As a best in class service provider, we believe we are well positioned to capitalize on these favorable trends and the strengthening demand environment.
Moving on to slide 4 we have a clear path forward.
And our teammates will be the key enabler for us to realize the full potential of our growth strategy.
Operational excellence starts with our teammates and we're committed to investing and our people to drive and engaged inclusive and high performing team.
It is our goal to be the.
We are of choice and the automotive.
Service industry, and our deep bench of talented technicians is paramount to our success as an organization.
To ensure that we attract and retain the best talent, we offer career advancement and a robust curriculum with our online training platform Monro University.
Our city, we also provide our technicians with the automotive service excellence certification to advance their technical sales of skill set and support their career growth, while increasing productivity and ensuring top quality service for our customers.
Our continued investment and highly trained and certified technicians.
And <unk> key tenant of our employee volume employer value proposition and an important differentiator and the industry.
The beginning of fiscal 'twenty, 2 we have continued to hire new technicians to match the surge in customer demand and to ensure we have optimal staffing levels and our stores to meet the continued.
Growth and our service categories going forward.
In addition, we've recently added 2 industry veterans to our leadership team met Hanson as our new Chief Human Resource Officer, and David Nicholls as our senior Vice President of marketing and category management.
Matt brings broad experience and leading large scale performance.
Is ex driven teams and will focus on advancing our vision to be a best in class field Blood service organization day.
David will focus on enhancing monro as brand position and the communities and which we serve and support our strategic customer focused initiatives as we aim to be our customers' number 1 choice for automotive services.
As with the continued support of our board of directors I'm committed to ensuring the continuity of Monro is growth and transformation strategy through our monro forward initiatives.
In fact, my conviction has only grown stronger over the past few months that we have the right strategy for our organization.
Our top priority.
Our formula is to bring these initiatives to life and at every store for every guest and for every teammate.
At the heart of this strategy is our customer centric approach and the Monro way of serving our communities we.
We are focused on bringing customers the professionalism and high quality service.
Service, they expect from a national retailer with the convenience and trust of of neighborhood garage.
When new customers visit our stores, our technicians are able to inspect their vehicles and provide them with a clear understanding of their vehicle needs.
This complementary inspection gives us the opportunity to wreck.
And now other needed services to the customer and perform these services during the current or future of visits.
Our objective is to build of lifetime relationship with our customer from their first visit to our store through the entire lifecycle of their car service journey.
Turning to slide 5 and addition to supporting our Monro forward initiatives, our strong cash flow and solid financial position affords us the opportunity to take advantage of strategic and value accretive consolidation opportunities and our fragmented industry.
We closed the acquisition of the mountain view tire.
Higher and service and April further solidifying our footprint and the Western region with 30 retail stores and the Los Angeles area.
We have been focused on seamlessly integrating this acquisition and are pleased with the contribution to date.
Strategically located acquisitions at attractive valuations remain a corner.
Stone of our growth strategy, we have a robust acquisition pipeline and are well positioned to take advantage of the many opportunities for consolidation and our industry. We are excited about our growth prospects and the attractive and dynamic Western region region and as previously mentioned, we will also leverage greenfields.
Sales to fill out our footprint and optimize store density where needed.
Our scalable platform allows us to quickly build new stores to meet our target customers, where they are while leveraging our playbook to ensure a consistently high quality experience and each store.
We have opened 6.
Fuels during the past year and a half and are currently considering several additional opportunities and markets, where we are underpenetrated.
In summary, we delivered outstanding performance this quarter and see a number of opportunities for both topline and margin expansion going forward from a top line perspective, we believe we can drive higher.
Traffic to our stores as vehicles miles driven improves in addition, as we continue to drive stronger performance and our service categories. We also expect our sales mix to favorably impact our margins.
As we look forward on our customers teammates and in store execution will be the key drivers.
Drivers to realize the full potential of our monro forward strategy.
We will invest and are people, who will be critical and our success through the next phase of our transformation.
We will focus on advancing our vision to be a best in class field led service organization to increase the overall lifetime value to our customers.
Stakeholders lastly, our steadfast commitment to drive strong cash flow will allow us to continue to invest and attractive acquisitions and greenfield expansion opportunities to build a strong scalable platform for sustainable growth.
With that I'll now turn the call over to Brian who will provide an overview of monro.
And first quarter performance and strong financial position Brian.
Thank you, Mike and good morning, everyone. Let me take a few minutes to talk about our first quarter performance and the meaningful progress we made in the quarter.
Turning to slide 6 sales increased 38, 4% year over year to a record.
<unk> hundred $41.8 million and the first quarter of.
Up approximately 8% compared to pre COVID-19 levels and fiscal 2020.
Same store sales increased 34, 5% driven by our key service categories and continued strength and tires.
Sales from new stores.
And 3 increased by $14.1 million, including $13.6 million from recent acquisitions.
Gross margin increased 140 basis points from the prior year to 36, 8%.
And year over year increase was due to higher comparable store sales, which resulted in lower.
Cash distributions and active occupancy costs as a percentage of sales.
Also contributing was a higher sales mix of service categories compared to the prior year period.
Variable gross profit was positively impacted by an 8% year over year increase and gross profit per tire, reflecting the <unk>.
<unk> fixed of our tire category management and pricing tool.
Regarding labor costs, our training initiatives continue to drive increased labor productivity. However, we experienced higher technician labor costs as a percentage of sales due to more technicians working overtime and order to meet the surge and demand.
We expect this to moderate as we increased staffing levels.
We also expect continued gross margin improvement versus prior year as our service category sales continue to strengthen.
We continue to execute disciplined cost controls with total operating expenses of $98 million or 20.
Benefit 7% of sales as compared to $76.1 million or 38% of sales and the prior year period.
The year over year dollar increase included $3.9 million and onetime litigation settlement costs.
We also had higher store management and advertising expenses in the quarter.
<unk> 28 to support higher consumer demand.
The remaining dollar increase was from the expenses of 44 net new stores.
Our decrease in operating expenses as a percentage of sales resulted from an increase in comparable store sales and excluding litigation settlement costs operating expenses for the first.
Quarter were 27, 5% of sales compared to 38% of sales and the prior year period.
We previously disclosed and our periodic reports and employee wage and hour action filed against us at <unk>.
Settlement agreement is currently being reviewed and we believe that the settlement is and the best interest of our company.
First quarter operating income for the first quarter more than doubled to $27.9 million.
Or 8.2% of sales as compared to $11.4 million or 4.6% of sales and the prior year period.
Excluding litigation settlement costs operating income for the first quarter was $31.8 million.
<unk> or 9.3% of sales.
Net interest expense decreased to $6.9 million as compared to $7.4 million and the same period last year. This was principally due to a decrease and weighted average debt, partially offset by higher average interest rates.
Income tax expense.
$8.3 million compared to $1 million and the prior year period.
Net income was $15.7 million as compared to $3 million and the same period last year.
Diluted earnings per share was <unk> 46 cents.
Compared to 9 for the same period last year and.
Adjusted diluting.
Diluted earnings per share for the first quarter of non-GAAP measure was <unk> 55.
Which excluded <unk> <unk> per share related to onetime litigation settlement cost a penny per share of acquisition due diligence and integration costs and a penny per share benefit from and adjustment to the estimate for prior year store closing costs.
Was this compares to adjusted diluted earnings per share of 15 and for the fourth first quarter of fiscal 2021, which excluded <unk> <unk> per share of store closing costs.
As highlighted on slide 7 we continue to have significant financial flexibility to support our operations and execute.
Long term growth strategy, we generated $63 million of cash from operations and the first quarter, we maintain our disciplined approach to capital allocation and invested $5 million and capital expenditures paid $62 million for acquisitions and spent $10 million and principal payments for financing leases.
And our additionally, we distributed $8 million and dividends.
Our balance sheet and liquidity position remains strong at the end of the quarter, We had net bank debt of $181 million and a net bank debt to EBITDA ratio of 1.1 times we.
We had cash and cash equivalents of approximately 17.
And $7 million and availability under our revolving credit facility of approximately $372 million.
As we progress through fiscal 2022, we remain committed to managing our business for maximum cash flow first we plan to continue to make operational enhancements across our business to expand.
And margins.
These efforts combined with top line growth will drive EBITDA growth and increased cash flow generation.
And fiscal 2022, we continue to expect approximately $15 million to $20 million and structural cost savings and addition to $5 million and benefits from store closures.
Compared to fiscal 2020.
In addition, we remain focused on working capital improvement and we believe we have additional opportunity in this area.
Turning to our outlook on slide 8 the COVID-19 situation remains fluid, which makes it difficult to accurately forecast the impact of the ongoing.
Pandemic on our future operations.
While we're not providing formal guidance for the remainder of fiscal 2022, we remain optimistic given our first quarter momentum and strong second quarter to date sales and gross margin trajectory.
However, we do expect comparable store sales to moderate as compared.
To the 34, 5%, we achieved and the first quarter as comparisons get less favorable and the second quarter through the end of the year.
And for the second quarter comparisons become less favorable during the latter part of the quarter compared to July comps.
Lastly, we have provided and some financial assumptions to assist with your modeling we expect tire.
<unk> total cost to increase year over year and.
And in light of cost increases and general inflation and the current environment, We will continue to leverage our diversified supply chain and cost leadership position.
We have of successful track record of operating in an inflationary environment, while maintaining and expanding gross margins.
Tire and lastly regarding our capital expenditures, we expect to spend approximately $30 million to $45 million and fiscal 2022 dependent upon the amount of store refresh activity that we undertake.
And with that I'll now turn the call back to Mike for some closing remarks, thanks, Brian we're very encouraged by our.
Cost performance and the first quarter and optimistic about the outlook of our business overall.
Overall, we continue to be well positioned to capitalize on strengthening demand and have the financial flexibility to execute our growth strategy to deliver long term value for our shareholders.
As highlighted in slide 9 and I would like to update you.
And a robust corporate responsibility efforts, which continue to be the lens for evaluating risks and opportunities that could materially impact our business over the long term.
As part of our commitment to accountability and transparency in this area I'm excited to report that we increased the oversight of our ESG strategy at the senior.
And on and board levels, and recently launched Monro forward responsibly.
Our first corporate responsibility report.
And we view our responsibility to our teammates customers the communities and which we operate and doing our part to take care of the environment is not only the right thing to do.
But as an integral.
<unk> component of our long term planning and success. While we are early in our formalized ESG journey Ah report maps to the appropriate SaaS V standards for the multiline and specialty retailers and auto parts of industry and we're committed to increasing our disclosures over time.
Working with Matt Hudson.
Leadership, New Chief Human Resource Officer, we are excited to further align talent development with our business goals and solidify our diversity equity and inclusion strategy, which we believe will be instrumental and driving and engaged workforce to better serve our customers and communities.
We look forward to sharing additional information on these important.
<unk> and initiatives in the quarters and years ahead.
With that I'll now turn the call over to the operator for questions.
At this time, we'll be conducting a question and answer session at <unk>.
And would like to ask a question. Please press star 1 on your telephone keypad and confirmation tone will indicate that your line.
And our question queue, you May press Star 2 if you would like to remove your question from the queue.
And for participants using speaker equipment and may be necessary to pick up of your handset before pressing the starkey.
1 moment, please while we poll for questions.
Our first question is from Jonathan <unk> with BMO capital markets.
Please proceed with your question.
Good morning.
Good morning, John.
For July.
I'll close where the service categories to returning to fiscal 2020 levels.
Yeah. This is Brian Jonathan and I appreciate the question.
If you look at our performance in the service categories. You can obviously see for the quarter nice sequential progress in those categories as well as outperformance.
Weighted to the overall comp.
We saw leadership and Q1 from our service categories, which as we noted really helped us to improve our year over year and sequential gross margins. We saw those continued trends into July with our up 15 being led higher by the service categories, which has created.
And nice trajectory and our growth continued increase and our gross margin performance year over year.
So we are.
And making good progress.
Overall, our comparable store sales are trending higher than they were in.
And.
FY 'twenty.
<unk> 'twenty.
We still have opportunities to.
Strength in our service categories to get to pre Covid levels.
Okay, Great and just a follow up on that with vehicle travel stabilizing.
Is there any reason that sales mix will not return to historical levels as recruitment.
<unk> been a constraint or have there been any market share changes, we should be aware of.
John This is Mike Thanks for the question.
I don't see any constraints I would say that the biggest opportunity that we have is on the recruitment and development side.
Lot of the focus of we really starting before 'twenty 2.
<unk> was really bringing our team on back from.
To enable at our stores getting back to staffing levels that we can handle the surge in business and.
And what Youre seeing right now is a very healthy shift and mix on the categories. So we just need to make sure that we have the technicians and were.
Constantly recruiting just like pre pandemic levels, we're constantly recruiting to make sure that we're staffed for the jobs at our customers requires to perform.
Okay.
Thanks, and on the acquisition pipeline is there any further color you can share with us.
And in.
<unk> talked about the number of <unk>, you've signed for example, and.
And are you seeing any.
Change in multiples of our willingness to sell at this stage.
All of Us Jonathan I'll start.
I think there's a lot of activity going on right now we don't have anything to talk about and this earnings release.
And I would say, there's a lot of opportunity out there. So we are as aggressive as ever and we're financially positioned extremely well.
And where we can't just like my prepared remarks, if we can't buy we will build and I feel very strongly that there's a lot of green space for us, especially as we go out west and.
Policy to look at these marketplaces, such as Colorado, Arizona, Texas, and then filling out of California, and it's just a fantastic opportunity. So.
Not specifically talking about anything, but we look forward to share with you some more good news.
On future earnings calls and Jonathan the only thing I would add to that is while.
And we didn't comment on the 10, plus and <unk>, we are still at those levels.
And like we have been historically sort of to.
To Mike's point of level of activity is strong and historical multiples are still within the ranges of where we've been of current multiples are still and the ranges of where we've been historically.
And apart although with Greenfields.
There is.
Longer time for development of the stores or there are some advantages to building a greenfield versus acquiring brownfield and some of these regions.
Jonathan This is mark and I'll handle a good question and I've actually spent.
And this weekend and our Greenfields down south.
The biggest upside is literally you're creating a best in class experience you have your model.
It's just.
It's just really clean it's a beautiful looking store and not only of that it's been built to be very efficient and and we're not dealing with.
30 year old and <unk>.
<unk>, we're dealing with really well.
And when we introduce our new team, they're actually seeing a shiny penny and I do believe on the Greenfields, what I'm receiving from in my travels over this weekend is the customers like to come to these new stores 2 in many cases.
But with that being said I think that's.
And where our focus right now, especially on some of the acquisitions that we have done in the past our focus out west is really to get these acquisitions up to speed and getting our rebrand re image.
Caught up on the acquisitions and California, So that we have a best in class environment for not only our customers, but also for our teammates.
Ill pass the line and thanks for your comments.
And thank you.
Our next question is worth of Brian Nagel with Oppenheimer and company. Please proceed with your question.
Hi, good morning.
Good morning, Brian Congratulations on a nice quarter and I start to the year.
Thank you.
It's a question 1 of.
To ask is.
And I understand it's gonna be difficult to answer, but if you. We look at this at the improvement and sales here and in this quarter.
And he parse it out of me how do you think of this as we try to gauge at the sort of say sustainability of it and I recognized that you gave some of some nice parameters. How we should think about that through the balance of the year, but if you look at the quarter because.
The question is I mean, how much of you think that is pent up demand on the heels of the pandemic and then second and probably more importantly are you you've seen evidence of that.
The Monro forward initiatives are helping the company to perform better and you asked as demand is returning.
So Brian let me take a shot at this is Mike.
Thanks for the question I would say that with regards to Monro forward remember just to remind everybody. We touched people product promotion technology and then on top of at we rebranded and re image. So we touched a lot. So most of my focus right now is really how do we bring this to life not only for our customers for our teammates. So it's all about in store execution.
What I would like to point you to is when we talked about some of what I'm proud of the team and what they delivered at our tire business was up 25%.
Our alignments are truly attachment and that's all about the culture and making sure we're taking care of the customers properly that's up significantly over.
Over our entire performance, so I am actually seeing our teammates react.
And they are doing the right thing for their customer.
Some of what I believe is very sustainable and our business model going forward.
Got it.
And then the second question I would ask you mentioned or it was mentioned in the prepared comments just about.
Cost inflation.
To what extent.
Have you been able to pass these costs costs along.
Yeah and and.
Any thoughts on that going forward.
Okay. This is Mike again, but I welcome Brian's comments also but let me just give context I've been calling on Monro for 20 years.
And ROE has done an excellent job managing expenses.
Over the tenure that I've been involved with monro as a supplier I can definitely relate to that.
So we've done an excellent job with that but let me give you a broader context.
When you look at inflation because of lot of conversation about inflation on the service categories.
Most of the cost is around people when you look at at the repair order and the cost of labor is the biggest component and Brian talked about that and the prepared remarks, managing over time make sure. We're scheduled properly making sure people are.
Not spending the overtime, because we have enough people to be able to manage the demand now.
And that's half of our business. The other half of the business is it's very much tires, now and Thats a different stores most of the cost of tires. So our tire category management is very relevant and I see that really driving significant value.
And our company I believe it's very sustainable and it's really just managing good.
Better best of traditional retail methodology of managing costs.
Yeah, and I would only thing I would add to that Brian is that that's exactly why we highlighted the 8% year over year improvement and gross profit per tire. It really shows that that category management tool and our attention to managing the tire category.
Is allowing us to navigate any inflation that we may be seeing.
I appreciate all the color. Thank you.
Thank you.
Our next question is from Bret Jordan from Jefferies. Please proceed with your question.
Hey, good morning, guys.
Hey, good morning.
On the labor inflation ex overtime and could you talk about sort of maybe what at what our regular our inflation rate might be and the labor side.
Yes. This is Bryan Brett.
No we haven't seen a significant labor pressure.
At 2 the rate as you know our compensation.
Compensation plans for our technicians are incentive based and.
And productivity based and so most of our technicians are earning of wages in excess of our any stated clock rate. So that allows us to be very competitive with.
Those programs and really reward productivity and reward volume and sales and throughput of the stores. So I think that's allowed our model has allowed us to mitigate.
Mitigate any of that any of that labor inflation and that might be out there and in other parts of retail.
So really the drive for the quarter.
A related was really driven by baidu at that overtime differential.
Okay, and then I guess, when you think about investment and the infrastructure distribution and the south east or the West are you thinking you've got enough scale and those markets to build out distribution infrastructure.
Brett Let me take that this is Mike thanks.
Thanks for the question, we are looking at building or partnering and that's probably the best way to say Theres a lot of partners that are looking to do business with monro.
To enable our stores to be able to properly take care of their customers, So and the 3 or 4 months that I've been here I'm really trying to develop partnerships and who's looking to support Motorola and the good news.
There's a lot of people don't want to do a lot of business with Monro.
If we can find the appropriate partnerships will built similar to our greenfield strategy, but I feel confident that we can partner with long term and a long term relationship that will enable us to continue to grow our service business.
Okay, Great and then Brian just a.
And could you give us the monthly for the quarter comp.
Yeah, sure we were up 76% and April.
28% in May and 14% in June and then again, 15% in July and.
And that trend is obviously reflective of prior year comparable.
A housekeeping as well.
And Greg Thank you.
Thanks, Brad.
Our next question is from Stephanie <unk> with <unk>. Please proceed with your question.
Hi, Good morning, Thank you for the question.
Good morning, Inc.
I wanted to touch on.
And we'll try and a side of that as far of second I know you talked about having to step up some overall labor expenses just to meet staffing means but also have a pretty nice structural cost savings baked into your expectations for this year. So as you kind of look at the full picture here do you think that there's an opportunity maybe to exceed.
And the structural cost savings target of you align maybe as you get revenue up to a call at at pre Covid levels kind of look at the business model of course of the last year and make some changes any color there would be helpful. Thanks.
I appreciate the question Stephanie I think if you look at our.
Excluding.
<unk>.
Net legal settlement, if you look at that 27, 5% G&A as a percentage of sales I think thats right on our internal expectations and right, where we expect to continue.
To trend as the quarters move forward. So I think we're happy with the leverage that we're seeing in our and our.
Our business and the flow through that those higher sales are driving as we certainly would have expected and did expect we added back advertising expenses versus the prior year levels, which were pretty much completely.
Just to emergency levels last year from and from an advertising standpoint as the Lockdowns.
Excluding the consumer environment did not lend itself to to marketing, but we're back to levels that we feel are appropriate to support the demand.
Much more efficient and entering COVID-19 with our with our digital strategy and our CRM strategy. So we're getting better return on advertising dollar spent.
But still bringing advertising levels to be supportive of our current.
Current demand environment. So I think we've got the G&A structure, right, where we want it at that at the levels I described and would look for that to continue as we move through Q2 and 3.
Great. Thank you so much for the color.
Thank you. Thank you.
Our next question is from David Bellinger with Wolfe Research. Please proceed with your question.
Hey, good morning, Thanks for taking the question.
And then another 1 on labor constraints and the inflation, we're seeing across the marketplace does at any comment on this that got better or worse through the quarter any impact from.
Total tax care of credit that we saw more recently and how long do you think these labor issues persists before we get back to cold and normalize the labor environment.
Well David This is Mike Thanks for the question and I'll start and I'm sure Brian will pile on with the labor conversation.
Let me just make sure.
And it goes back even before pre COVID-19.
Labor and the technician development of a lot of what we've talked about in the past with training, how we develop of our technicians thats been Paramount.
And none of that's changing and it's actually just been elevated as we continue to invest and our training initiatives building out of best in class.
Training organization.
So that we can take people who are entering into.
Our service community and really developing their skills to be able to take care of the car. So that's what we've done before.
<unk>, it's just been enhanced really in fiscal 'twenty 2.
Now from a recruiting perspective I wanted to be clear, we have over 5000 and technicians and.
I. Appreciate every 1 of them, we do have hotspots, where those hotspots, we're incredibly focused on making sure that we're staffed and that we're building out the team with qualified technicians that can do all jobs.
Both around the wheel and under Hood, because that's where the both of the business is going that is what customers expect from a full.
Provider that is always going to be of challenge, but it starts with bringing people on early and then investing and them with training. So that we can really drive.
The full service offering and the communities that we serve now is out of challenge, yes, but it's something that's been challenged for the industry for many years I do believe.
Full serve that we will be the destination for our <unk>.
Because we're focused on our technicians first we will be the destination for the best technicians and the marketplace. That's the goal that we have for our organization.
Very helpful. I appreciate all of that and just my follow up.
You mentioned potentially.
And building more locations as opposed to buying are you factoring higher cost now.
Steel and other commodities moving up and.
The quantification of that and if he could.
Sure. It goes back to thank you for the question. It goes back to my other comment when you look at raw materials.
Please.
And that's more on the service side of the business. So when you look at brakes rotors, that's a smaller component of actually our true costs most of it at all about labor and managing labor, Brian talked about the overtime and we have to mitigate over time through a proper staffing levels. So we give our teammates these off and they stay very productive when they do come to work for us. So that is the focus that we have.
With regards to the commodities and what those were able to obviously continue to manage those expenses and then we've always been able to prove to pass along those expenses to the consumer and at the same type of staying extremely competitive 2 hour.
Of our competition and the marketplace.
Great Thanks, and I appreciate it.
Thank you David Thank you.
Our next question is from Rick Nelson from Stephens. Please proceed with your question.
Thanks and good.
Good morning, Mike.
To ask you about Terra and Tiger.
And at quarter.
Or how.
How does it change from what you take him to of Street growth was at that period of it.
I'll take that Rick This is Bryan and thanks for the question.
We had we were up 25% as we sat and our tire category.
And that was really kind of equal parts of units.
Price mix and so we feel good about the balance there and it certainly helped us to deliver the at 8% gross profit per tire that I discussed.
And I think that as we look at our performance versus the tire industry throughout the pandemic and certainly as we've.
Entered into fiscal 2022.
And it's and Bill like we've said that our unit performance has been at or slightly above the U S. Tire industry. So continued good performance there driving units driving average selling price and driving margin a lot of the benefits from our category management.
Okay. Thanks for that at any.
Todd and tire sales are of lag.
From.
Are you in fact.
Trading and sales of her merger and.
The card category.
Well, Rick I'll take that this is Mike I would say that.
I think it's.
It's not the entire sales of logging and just our focus on the service categories and that's how I look at at we're seeing extremely competitive we are focused on profitable sales, but at the.
I think the theme that we should walk away from this conversation is that is the fact that we are now focused on the service business, we love selling tires, but we love selling service.
And the fact that our service business now is getting the attention and the focus for to continue to grow and that should enable consistent comp sales growth quarter over quarter.
And also significant margin improvement.
Okay got it.
At the time makes sense.
Sure.
And so curios kind of Mt and abused stores how.
How those stores are performing relative to your expectations that Inc.
Changes.
You're putting into those stores and how you are you're right Brian.
And those stores.
Thanks, Rick this is Mike.
Mike I'll take that I was out there I love those stores they've been.
Very successful for us I've been extremely pleased with the first 3 months I remember just so everybody that was in April 26th close. So we did talk about that the last call, but they are contributing immediately at just quality people. They are heavy service business.
Type of great reputation of the marketplace now.
And with mountain view and al entire now where and the process of re imaging those stores, making sure that they are up to snuff.
With regards to everything we've done with Monro forward and.
For the back half of the year, we're really going to get those stores cleaned up.
And nature.
Thanks, and good luck.
Thank you for thanks, Greg.
Our next question is from Scott number with C. L King and Associates. Please proceed with your question.
Good morning.
Good morning, Scott.
Just wanted to think of a little bit more.
And to the the sales versus pre pandemic levels of or I guess, the first quarter of Q1, Brian you you did say that I guess across the board that you are generally and.
And again this is on a same store sales basis, you are up versus 2 years ago. At this time could you quantify how much and maybe also are all categories.
And of chocolate is there and any other.
Low hanging fruit that we can expect.
And this comes back.
Well I think I think what I said was and the prepared remarks that were up 8% are and total sales. So that would take into account any stores that we've added since the pandemic from our comparable.
<unk> store sales standpoint, and the first quarter, we were back at slightly above so.
I'm not going to quantify it but at slightly above pre pandemic levels, we've seen that accelerate and July where were.
We're moving beyond <unk> at pre pandemic levels, and we're seeing that acceleration.
As we described in the prepared remarks, and we're also seeing that acceleration and margin.
As we kind of have a target of getting back to pre pandemic levels as well.
Got it and just by category is there any area that's been lagging that we can expect to really.
Again, all of what we've seen that already.
In July.
Well I think what Youre seeing is just to kind of remember during COVID-19.
<unk> talked about in FY 'twenty, 1 that our service category of has lagged and our tire category held up relatively and was in line with the.
Industry is still down, but not down as much as our service categories and Mike's comments to the last question around our focus on service and making sure that we are staffed for service to say, yes to service.
Is paramount and us continuing to.
Recover and see the strengthening and our service categories.
And we made tremendous amount of progress in Q1 with our service categories up some of them double of where our tires were.
And we expect that to continue at.
And certainly continued into July and we expect to continue it will be a big component of our margin improvement going forward.
Got it thanks for taking my questions.
Thanks Scott.
We have reached at the end of our question and answer session I would like to turn the call back to Mr. Kroeker for closing remarks.
Well, thank you for joining us today this isn't.
And exciting time to be part of Monro, we are a strong foundation to build upon to create long term value for our stakeholders I look forward to keeping you updated on our progress have a great day.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.