Q2 2022 Monro Inc Earnings Call
Yeah.
Good morning, ladies and gentlemen, and welcome to Monro, Inc. 's earnings conference call for the second quarter of fiscal 2022.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time if.
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And as a reminder, ladies and gentlemen, 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. Maureen Mulholland 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 a presentation that is available on the investors section of our website at corporate Dot Monroe Dotcom forward slash investors forward Slash investor Hyphen resources.
If I could draw your attention to the safe Harbor statement on slide two I'd like to remind participants that our presentation includes some forward looking statements 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 in monroe's filings with the SEC and in our earnings release and include the significant uncertainty relating to the duration and scope 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.
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 presentation and in our earnings release.
With that I'd like to turn the call over to Lynn Rhodes, President and Chief Executive Officer, Mike Broderick, Mike.
Thank you Maureen and good morning, everyone. Thanks for joining us.
We had another strong quarter to round out a great first half of the fiscal year.
Topline performance surpassed pre pandemic levels, and we achieved another record sales quarter.
We delivered double digit comparable store sales growth across all our regions and categories.
This was driven by strong demand continued implementation of our monro forward initiatives.
Consistent execution across the organization.
Over the last few quarters I've witnessed the skill and determination of our seasoned leadership team and our teammates across the nation.
I'm appreciative of the hard work they are doing to drive our business towards the goals, we have set while navigating through a challenging environment over the last 18 months.
Turning to slide three as we continued to deal with COVID-19, and its impact on our stores teammates and customers. We are encouraged by our strong fiscal first half performance and remain confident in the strength of our business for the remainder of the fiscal year.
Encouragingly vehicle miles traveled continues to improve.
Drivers returned to the road. Additionally, consumers are holding onto their cars longer as evidenced by lower new car sales.
That's our best in class service provider, we believe we are well positioned to capitalize on these favorable trends and the strengthening demand environment.
We are particularly encouraged to be increased our service sales as a percentage of total sales during the quarter contributing to improved gross margins.
Our second quarter performance reflects both higher traffic and higher average ticket we.
We continue to manage our business to ensure our staffing levels are appropriate and our marketing efforts are optimized with the intention to efficiently match capacity with demand.
Notably on slide four we exited the second quarter with strong momentum into our fiscal third quarter with comps up approximately 14% in fiscal October compared to comps down 12% in the same period last year.
Moving to slide five we are relentlessly focused on improving our in store operational execution in the five key areas.
Or what we call the big five staffing scheduling training attachment selling and outside purchase management.
We've already made investments in technology to assist us in delivering improvements in these areas specifically are technology based.
Labor and scheduling tool and our online learning management system, Monro University, which provides a foundation for managing and developing our most important asset our teammates.
We are now using this foundation to drive tangible improvements in our business.
Regarding staffing scheduling we are optimizing our staffing levels and store schedules to ensure that every store staffed with the right number and skill level of technicians every hour we are open.
This ensures we can perform our services at a time convenient for our customers and that's directly contributed to the outperformance of our service category comp sales during this fiscal year.
While we are encouraged by the results to date, we have a significant amount of opportunity in this area.
Over the past 90 days, we have made considerable inroads against a historically tight labor market by hiring over 250 net new technicians.
Although the environment remains challenging this marks a positive inflection where we were in the first quarter of the year.
We strive to be the employer of choice in the auto after market service industry as we recognize that our highly adept their conditions are integral to the success of the entire organization.
Regarding training, we are augmenting our online learning management system with virtual instructor led training as well as with in store training performed by our highly skilled field trainers.
We are using these different training methods to support not only our focus on the big five but to deliver other important content to our teammates this content centers around the critical factors that make a store successful and is tailored and targeted to both store management and technicians.
You've laid out a clear path for how 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 continue to make investments to drive motivated inclusive and high performing teammates.
The next item in the big five as attachment selling as.
As customers come to our store they want to make sure. They are receiving top tier care for from someone they trust to work on one of their most valuable possessions.
Our complementary inspection ensures that not only is the customer's car being serviced appropriately but also that any other problem associated with this vehicle can be addressed.
This also provides us with the opportunity to offer additional products and services, we are committed to ensuring that our technicians perform the complementary courtesy inspection on every customer beautiful. This allows our store managers to present the needed work and provide our customers with a solution to their car care needs.
Improvements in our execution of the courtesy inspection and the related selling of the additional services was another contributor to the outperformance of our service category comp sales during the fiscal year.
Again, encouraging, but we still have opportunity in this area. Our objective is to be the trusted partner for any automotive issue and the courtesy inspection hopes to quickly establish a relationship with the customers that can last for years.
Which brings us to the last item in the big five outside purchase management, we continued to consolidate our purchasing power behind our preferred suppliers within both the tire and parts categories to take full advantage of our buying power and scale. This allows us to leverage relationships with key suppliers while.
Gaining appropriate diversification and our sourcing strategy an important part of this consolidation is making sure that any purchases made by our store teams are being made with our preferred suppliers.
We have made improvements in this area through training technology and process that had been a contributing factor to our gross margin improvement. This consolidation in tandem with an increased focus on our company owned distribution positions us to support continued growth and profitability going forward.
Our experienced management team has been instrumental in driving our business forward and navigating through Covid and I cannot thank them enough. They have been motivated and focused and we look to continue to build upon our accomplishments to drive operational excellence at the heart of our mission as being best in.
Class service first organization that prioritizes its customers and the communities. It serves.
We're focused on bringing customers to the professional professionalism and high quality service. They expect from a national retailer with the convenience and trust of our neighborhood garage.
We also remain committed to our store re image program. We are currently focused on bringing the stores that we're currently acquired on the West Coast in line with our standards and kicked off this work at the beginning of October.
Following the completion of a comprehensive review of our various brands, we will move forward with the re image of our remaining stores as needed. We're also performing a review of the inventory stocking plan needed to support any store level brand changes.
Turning to slide six our strong cash flow and balance sheet positions us to take advantage of strategic and value enhancing consolidation opportunities in a fragmented industry.
Similar to the past quarters, we are and will continue to be a key acquire a family owned businesses. We are excited about the 17 stores, we are expecting to add to our portfolio in the next quarter with six in southern California, and 11 in Iowa.
These stores are expected to add annualized sales of $25 million and will further our geographical expansion.
This will bring our year to date acquisition totaled to 47 stores with expected annualized sales of $70 million.
We are looking to expand upon the success and we still have a large runway to deliver more store openings.
With regards to our corporate responsibility and ESG efforts, we've been taking these months following the release of our inaugural corporate responsibility report to work with our senior leadership team and to engage with our field managers to continue creating a framework of new encourage initiatives against which we can measure our progress.
In this area.
Our efforts are structured around the pillars of teammates customers communities and environment, which include business practices throughout Monro that we believe can aid our resilience overtime.
The board of directors through our recently renamed nominating and corporate responsibility Committee is engaged with US on these issues as we continue along our journey.
We look forward to sharing additional information on these important initiatives in the quarters and years ahead.
Ultimately, we delivered improved performance this quarter and see a number of opportunities for both topline and margin expansion going forward. We believe our steadfast commitment to operational execution will continue to drive strong cash flow that will enable us to invest in attractive acquisitions to build a strong scale.
Global platform for sustainable growth as.
As we look ahead, our focus on our customers teammates and in store execution will be the key drivers to realize the full potential of our monro forward strategy.
We will focus on advancing our vision to be a best in class field blood service organization to increase the overall lifetime value to our customers and stakeholders.
With that I'll now turn the call over to Brian who will provide an overview of monro second quarter performance and strong financial position Brian.
Thank you, Mike and good morning, everybody.
Let me take a few minutes to talk about our second quarter performance and the meaningful progress we made in the quarter.
Turning to slide seven sales increased 25% year over year to a record $347 $7 million in the second quarter up approximately 7% compared to pre COVID-19 levels in fiscal 2020.
Same store sales increased 14, 8% driven by broad based strength across all product and service categories.
Sales from new stores increased by $17 $8 million, including $17 2 million from recent acquisitions.
Gross margin increased 140 basis points from the prior year to 37, 6%.
The year over year increase was due to higher comparable store sales, which resulted in lower fixed distribution and 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 positive positively impacted by a 10% year over year increase in gross profit per tire, reflecting the ongoing benefits of our tire category management and pricing tool.
Regarding labor costs, our training initiatives continue to drive increased labor productivity. However, our technician labor as a percent of sales increase from the prior year period due primarily to overtime hours worked to service increased demand.
We expect overtime hours to decrease as we continue to hire additional technicians in our stores. We also expect continued continued gross margin improvement versus prior year as our service category sales strengthened.
We continue to execute disciplined cost control with total operating expenses of $96 2 million or 27, 7% of sales as compared to $80 1 million or 27, 8% of sales in the prior year period.
The dollar increase is due to higher store management and advertising expenses in the quarter to support strong consumer demand the.
The remaining dollar increase was from the expenses of 46 net new stores.
Operating income for the second quarter grew substantially to $34 5 million or nine 9% of sales as compared to $24 4 million or eight 5% of sales in the prior year period.
Net interest expense decreased to $6 $3 million as compared to $7 $3 million in the same period last year. This was principally due to a decrease in weighted average debt.
Income tax expense was $7 3 million or an effective tax rate of 25, 7% compared to $4 $3 million or an effective tax rate of 25, 2% in the prior year period.
Net income was $21 million as compared to $12 8 million in the same period last year.
Diluted earnings per share was <unk> 62 <unk>.
Compared to 38 for the same period last year.
And adjusted diluted earnings per share a non-GAAP measure was also 62.
This compares to 39 in the prior year period, which excluded a penny per share in monro forward initiatives and management transition costs.
As highlighted on slide eight we continue to maintain a solid financial position to support our operations and enable the execution of our long term growth strategy.
We generated $102 million of cash from operations in the first half of fiscal 2022.
And we remain we maintained our measured approach to capital allocation and invested $10 million in capital expenditures paid $62 million for acquisitions and spent $19 million in principal payments for financing leases.
Additionally, we distributed $17 million in dividends.
Our balance sheet and liquidity position remains strong.
At the end of the second quarter, we had net bank debt of $163 million and a net bank debt to EBITDA ratio of <unk> nine times.
We had cash and cash equivalents of $7 million and availability under our revolving credit facility of $400 million.
Earlier this month, we amended our credit agreement, primarily due to reduce our LIBOR interest floor from <unk>, 75% to zero percent.
We expect this will contribute $1 million in annualized interest expense savings at our current debt levels.
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 margins. These efforts combined with top line improvement will drive EBITDA growth and increase cash flow generation and.
In fiscal 2022, we continue to expect approximately $15 million to $20 million in structural cost savings. In addition to $5 billion in benefits from store closures compared to fiscal 2020 in.
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 nine 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 second quarter momentum and strong third quarter.
To date sales trajectory.
In addition, we have provided some financial assumptions to assist with your forecasting.
We expect tire and oil cost to continue to increase year over year considering.
Considering the inflationary environment, we will continue to optimize our supply chain leverage our strong strategic partnerships and capitalize on our cost leadership position, we have a long history of managing the business successfully through periods of inflation.
Lastly, regarding our capital expenditures, we expect to add approximately $30 million to $45 million of Capex in fiscal 2022, depending on the amount of store refresh activity that we undertake.
And with that I will now turn the call back to Mike for some closing remarks. Thanks, Brian we're encouraged by our robust performance in the second quarter and optimistic about the outlook of our business for the fiscal second half overall, we believe we remain well positioned to capitalize on strong demand, while having the financial flexibility to execute our growth strategy and deliver.
Long term value for our shareholders with that I'll now turn the call over to the operator for questions.
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Please while we poll for your questions.
Our first questions come from the line of Jonathan Lamers with BMO capital. Please proceed with your questions.
Good morning.
Good morning, Jonathan.
Mike now that you've been in the seat for another quarter.
You've indicated you see a number of opportunities for top line and margin expansion going forward.
Is there anything further you can tell us about changes you're planning to make to the retailing strategy or the acquisition strategy.
Just trying to get a sense of what types of opportunities we should be thinking about.
That's a good question Jonathan.
I would say very much so even in my prepared remarks, I'm very focused on in store execution.
And a lot of my attention is being spent majority of my time is being spent on making sure that comes to life.
My number one is to getting comp sales my number one focus is getting comp sales.
To significantly expand where we can show that we have a very strong model, which will then make us a better acquirer of family owned businesses because they can trust that we know how to run a business, we could actually be a better employer to new teammates because they actually see that theyre able to make a living working for Monro and then last but not least.
<unk>.
I think that we share with I can actually.
Basically contribute that conversation or the shareholders will actually see the benefit of our performance at the store level.
Our earnings performance, so very much for the first six months I've been with the company, it's focused on bringing the store experience to life.
I spent a lot of time in my prepared remarks, basically highlighting the big focuses for the business.
In the future there is more to retail in store execution. It's a very fair question I look forward to sharing with you over the next six months to a year.
Okay, Great and Mike maybe one follow up on your prepared remarks.
You mentioned courtesy inspection services were a strong contributor to the comp this quarter.
Was there a step change in.
Training to support that or the rollout of that or was it just sort of us.
To highlight this quarter.
I would.
That courtesy inspection I'm glad you brought that up also it's so important to our organization.
Going back to some of the tools that the team is actually deployed even before I came on board when we talked about the labor scheduling system, we are actually giving our teammates time in order to perform that courtesy inspection.
That is a big unlock to making sure. Our teammates are qualified technicians can actually be properly scheduled that they are available for the services that our customers are expecting so what I actually feel like what happened over the last six months is the fact that we brought our in store focus execution combine that with our labor scheduling and.
One of the things that really came to life was having time and technicians, who are properly skilled to be able to do the courtesy inspections and thats an expectation in our business model.
Got it.
And a lot of the issues.
People are worried about four.
The industry like labor shortages.
Supply chain challenges you seem to be flowing through those this quarter, you're able to comment on.
Any change in your ability to maintain staffing a recruit technicians recently.
And what effect the supply chain.
<unk> might be having on operations.
So let me start by <unk>.
Recognizing our HR organization driven by recent.
Add to the organization met Hudson I said, it was going to be a very important hire of mind. It has come to life in his short tenure and the whole HR organization teaming up with our operations team.
And then Lo and Behold, we now have a system to be able to tell us where the greatest needs are and what needs the skilled employees.
Actually need so when you look at the combination of a very strong each of our organization coming July teaming up with the season operation organization, and then using technology I would say when you put those three things together it is actually literally giving us momentum and we have a long way to go.
But we are making significant.
That is an achievement of our organization and I look forward to even bigger and better numbers to share with you.
Now, let's go back with inflation that supply chain and this really goes back to the business for 30 years. It's all about partnerships is all about relationships.
For us to be a great customer to these preferred suppliers, we need to share with them our.
We need to be better as a customer.
And to our customers, but we should be able to be very reliable. So that they can really factor our demand into their overall service.
So that the.
Basically manage capacity for us as well is that we get and we share with them what is our demand forecast and they can incorporate that into their supply chain and.
And I think these are the things both on tire some parts that are just coming to life over the last six months.
Thanks.
And one more Brian you mentioned you are expecting further mix improvement to benefit gross margin into the next quarter.
To be clear are you seeing continued improvement in service sales in October versus September.
Or is the comment more that the service sales R. R.
I mean have they returned to pre pandemic levels and if so when did they end.
Can you comment on the October versus September.
Yes, I would say Jonathan that related to the trends.
We saw the outperformance of service in Q1 continued into Q2 those same trends that we've been reporting on our continuing into October. So the constitution of that plus 14% is very similar with service, leading but continued strength in tires.
And in most categories, we are back to pre pre pandemic levels. There are a few maintenance categories that are not but our main categories like brakes.
Obviously tires are back to pre pandemic levels.
Thanks ill pass the line.
Thanks, Jonathan.
Thank you. Our next question is coming from the line of Brian Nagel with Oppenheimer. Please proceed with your questions.
Hi, good morning, Congrats on another good morning Barbara.
So I'm going to ask Scott I think this is similar to a question I've asked in prior quarters, but just as we look at the results to date and particularly though.
Impressive comp store sales gain.
Recognizing that you know we have a very very fluid backdrop for your space and really consumer broadly, but I mean, how much of it.
Could you parse out the.
Sales growth were seeing the improvement of the business versus <unk>.
Rebounding healthy backdrop versus the internal initiatives at Monroe.
Brian It's a good question I would say that we're really focused on the.
The health of the business. So in the past we shared with you our mix of tire and service was approximately 56% to 44% and Thats navigating to $53 47.
I think that that ultimately is driven through the store execution, bringing to life the service categories.
We don't want to stop there we want to have a healthy tire business, but it needs to be complemented with our multi service business and our ratio should be more like 50, 50, I think as we move to a 50 50 I give credit to the team most definitely the team.
Really bringing that to life.
And that all goes back to making sure our stores are ready for the customers.
During the routine inspections and that's.
Thats something thats very much in our control.
Perfect.
And maybe as a follow up to that.
And recognizing just the fragment nature of your space.
Is there anything any data you're looking at to give us a better idea of market share here.
Market share for memorial lately.
Yes, I think Brian as we've talked about kind of market share in the past, we've kind of broken it up.
Because we've got different pieces to our business that did not not everybody has where youre trying to compare to.
If you look on the tire side of our business, we are tracking at or above industry units and we continue to do that we did that throughout the pandemic. So we feel good about our unit share on the tire side with that though we are driving significant average selling price improvements as we improve our mix there and we talked about our.
Gross profit per tire being up 10%.
Year over year, so continuing to see profit, while we while we drive that volume. So I think on the on the tire side, we feel good about our market share position and the profitability that we're driving while continuing to hold and grow that market share.
On the service side, it's a little more difficult difficult a little more.
Fragmented and we probably look at a lot of the same data points that you do but that being said, we feel really good about our service business being up 50 plus percent in Q1 and being up in the 30 plus percent in Q2, and we think that that holds up very well to what we are seeing out of the other data points.
We observed.
I appreciate it congrats again thank you.
Thanks, Brian.
Thank you. Our next question is come from the line of Bret Jordan with Jefferies. Please proceed with your questions.
Hey, good morning, guys.
Good morning.
Could you talk a little bit and maybe sort of parse out the impact of inflation, I guess labor versus parts versus hires and when you think about your comment traffic and ticket were both off could you maybe give us a feeling for like what we're seeing in ticket from pricing.
Yes.
But.
I said both ticket and.
And average ticket and traffic actually were contributors to our success in the in the second quarter.
Great. If I can just remind everybody about the inflation in our business labor on the parts side the labor inflation of all parts of the very small part of the service performance on the tire side, Brian talked about it in his prepared remarks that is an opportunity that we're going to have to manage we're not seeing a lot of inflation because our customers are choosing.
To go through a good better best so as prices are starting to move up that are starting to make decisions around our choices and there is always about the value that we bring at monro to our customers, we're giving our customers a lot of choice.
So that they can actually manage.
Whats happening in the price marketplace. Lastly, Monro is very competitive we are through our category management tool, we understand what the prices are in the marketplace and we're staying right on the market and we are actually giving our customers through just strong category management that appropriate choice at every store that we are in every community that we.
Sure.
Okay. I mean, we're hearing about sort of mid single digit price increase from the parts side are you passing those through are you eating some of the cost inflation.
We will continue to do just like Monro has always done because I have been calling on them for 20 years. If we do take a cost increase we will pass them through but our number one goal is always to stay competitive.
Part of that cost increase that we do need to pass it on it's actually to give our customers more choice. So that we can manage the overall gross margin and gross profit.
From those sales.
Okay, and then a question on M&A Youre picking up 11 stores in Iowa sort of that new market.
What's your thought I guess as far as M&A geographic targeting are you pretty much open to to all markets or are you trying to remain sort of contiguous I mean, when you think about buying are there areas of focus.
I would say I would love the opportunity that we walked into Iowa, So I really look forward to bringing that acquisition to life.
And working with our team.
But I've said in the past I'm very focused on the southwest and California.
Okay great.
And I guess in the past passed prior to your arrival there was talk about adding distribution as you got density in some of these new regions do you think more around partnerships for supply as opposed to self distribution or do you think about building out markets and adding distribution infrastructure yourself.
It's a really good question I would say that Thats something I would like to talk to you more in the future, but in the meantime to answer your question very directly I really do believe in partnerships on the parts side and especially on the tire side Theres a lot of capacity out there.
And then augment that with our own distribution.
Incredible position to be able to navigate the next six months six.
Six months to a year, if there is any supply issues.
In order to support our stores and customers.
Okay, great. Thank you.
Thanks, Brent Thanks, Brad.
Thank you. Our next question is coming from the line of Rick Nelson with Stephens. Please proceed with your question.
Thanks.
Good morning like true.
Hello upfront.
Acquisition environment.
Alright.
Tim It is if you could.
The multiples that you're saying.
Perhaps a 17 stores.
And do you expect to rebrand the stores.
Good talking to you a great question.
So the the multiples that we're seeing on the deals that we've gotten done over the last 18 months are consistent with the multiples that we've talked about historically, so nothing to call out from a multiple standpoint.
On these deals related to the brand choice will be looking at all of them.
But.
Most likely the <unk>.
Our stores will be part of our car X brand.
And then also the southern California stores will will be part of our our brands that we that we're going through right now we talked about the brand study and we'll be we'll be making sure that we bring those stores into the right family of brand too.
To maximize the opportunity there right now we've got mountain view stores in California, Alan tire stores in California, and tire choice stores in California. So there is a choice for us to make there that we're working through.
Okay.
Important catalysts.
No.
Three brands could come on here in California.
I think that's very fair to say that Thats part of the brand studies to understand.
What is relevant to our customers all three brands.
Relevance to the consumer but more importantly, what we're trying to figure out what the brand is one of our customers need to know about the brand to really make it relevant in the communities that we serve so it's a two pronged approach where we're looking at this brand study.
Obviously, we want to make it very consistent we want scale.
We want to be able to make sure people understand the monro family of brands and what they stand for.
Alright.
All right.
Right.
<unk> added to our merger.
The tax careers.
Thank you.
Cuz point to meet demand and eliminate.
Overtime that should have been.
Kurt.
I look forward I don't think I'm going to share that specific number, but I think that would you'll hold me accountable for in the future is the appropriate number and I think from how its going to flow through into the P&L as really the drastic reduction in overtime and the fact that we can manage capacity in a much bigger better way. So that we can have some outperformance on total comp.
Yeah.
Okay.
Thanks for that.
Hello, everyone.
The tire category lagging Brexit MLR.
Any drivers there I'm curious how.
Tire units performed in the quarter.
How do you think the industry.
Grew in that period.
We do have industry is probably very similar industry data that everybody else is looking at one thing that Brian already highlighted was the fact that we actually from what we looked at we actually took.
Unit share and over the last over this time period. So we feel very strongly about the growth of our tire category now I've talked about this previously although 10% comps are lagging the other categories I look at it that still has a very strong contributor to our business model, we're very focused on tires.
But what I'm excited about is how our service categories are really coming to life.
In a big way.
Along that tire category once again going back to in the past we were $56 44 on a mix and we are trying to narrow down the very healthy range that ratio of 50, 50, and we believe for our shareholders. They are going to see that in our margin improvement as well as our teammates are going to be able to see that in ticket.
And in their compensation.
Okay.
Sam.
Thanks.
Good luck.
Thanks, Rick Thanks, Rick.
Thank you our next questions come from the line of David Bellinger with Wolfe Research. Please proceed with your questions.
Hey, everyone. Good morning, Thanks for taking my question.
Okay. So two comps rebounded nicely into the mid teens here, but if you look across the business.
Labor constraints that are out there broadly even with these 250, new hires do you think that the tighter labor situation, it's still holding back sales in some way.
I've been a long term retailer it's always.
Focused on the people.
So the easy answer to that question is the fact that yes, I would always like more people, but I do believe that it needs to be a combination of not only more people, but more skilled people. So thats why were focusing more on training and making sure that when we bring these people on were bringing them up properly and.
Lastly, it's about retention of those teammates we do have a lot of technicians over 5000 technicians right now how do I maintain keep them employed.
And actually make sure they make a living and that's some of the focus that we're talking about when we are looking at our advertising managing our advertising really sharp.
To capture the service category as well as those tire continue to capture our category a tire categories.
And finally, when I look at the capacity.
We're coming into the winter selling season, and I really want to recognize the team's work on bringing on more technicians I do believe we are positioned extremely well to capture market share in the tire.
Over the winter selling season.
Got it Okay, and then my follow up.
Brian You mentioned most categories were back to pre pandemic levels.
What are you seeing in regards to transaction counts are those still normalizing and do you expect to see more of a shift to ticket versus transactions ahead, just given the inflationary backdrop, we're seeing.
Yes, we are.
Related to last year, we said its traffic and ticket.
I would say that as you look at pre pandemic levels. We've done a good job of building ticket between now and then but traffic is continuing to improve so I think we've got the opportunity as traffic fully recovered to pre pandemic levels with the average ticket that we built in.
That's really where we start to see outperformance significant outperformance from from pre pandemic levels, but as it relates to the year over year improvement was driven by both ticket and traffic.
Great. Thank you very much.
Thanks, Dave.
Thank you. Our next question is coming from the line of Stephanie more with Truest. Please proceed with your questions.
Hi, Good morning, Thank you for the question.
Good morning, good morning.
And what we have in the past it was discussed about the potential to build out the density or your store base through Greenfield I would love to hear an update on any.
Any update on just that.
On the strategy.
The increased health and not just acquisition. Thanks.
Good question Stephanie. Thank you, yes, absolutely brought that up if we can acquire.
Properly then we would build in the communities that we wanted to go through there's a lot of green space out there.
And we're just looking at that as an opportunity to bring that to life.
But right now we are it seems like there is a tailwind on acquisitions, especially with.
And we're going to continue taking advantage of it and the team is very focused on bringing those acquisitions to life.
Understood. Thank you and then as my follow up.
And also I think there is some online initiatives through partnership.
Amazon, but also some of the investments that were made behind some of the Monroe brands. So maybe just where you stand on Jeff.
Building out at more of an online platform as well thank you.
Yes, Stephanie.
Related to our online presence I think that.
The areas that we've made some really significant strides with our technology is our our ability to accept online appointments and efficiently communicate.
Communicate with the gas related to those appointments, how that translates into the store and the stores.
<unk> to communicate with those guests. After an appointment is made so I think that's a big part of our of our focus has been making really taken some of the friction out of that and in particularly doing that obviously for mobile which is where the most of those appointments come through as it relates to actually transacting online through E Commerce that's been.
It's something we've had on our roadmap at a lower priority just due to the.
The limited share of transactions that occur online, particularly.
In our categories, our partnerships with our with our online tire sellers.
Remain important to us there's been no real changes in terms of how much those represent as a percentage of our sales or how much we see those sales in general represent of the industry.
So we've appropriately continue to manage those relationships and use them for what they are which is a great way to.
Speak to guests that we wouldn't have necessarily talk to otherwise.
Get them into our store to be able to build that relationship to the courtesy inspection like Mike talked about and then be able to convert them into a loyal munroe customer for the services that we can provide them and the other cars in their household so that's a key part of it.
But at the same time.
<unk> tracking where it historically has.
Got it. Thank you and then lastly for me.
So a strategic question about the heat chair with EV and I think in the prepared remarks.
You walk here.
Fair enough all vehicles, which Alan imply.
<unk> and others, but have you.
Certain markets, maybe just your presence in California, where they do have high EV penetrations and actually getting now and used vehicle.
<unk> are a little bit older.
Have you had to build out medicinal or make investments in new technology to support the maintenance of Evs I know the maintenance looks a lot different but from what I hear it certainly does happen in certain.
There's still a need for it so to speak so maybe if you can just talk about small pockets of investments that you made behind E D.
Definitely a good question.
This is Mike I, just we have not invested for EV, but I absolutely am taking advantage of the marketplace right now and the teams are taking in servicing those cars extremely well, we're replacing tires and brakes on electric vehicles right now I'm sure we have it in some of our shops, but going back to <unk>.
How we're going to position ourselves for the future. It really does go back to our training initiatives hiring initiatives scheduling initiatives, we want those vehicles to come into our shops, we want to be ready to be able to service those vehicles and yes, when we need to make investments in order to become relevant in that space and that space becomes extremely relevant to our core park will be ready for it.
Great. Thank you so much.
Thank you.
Thank you. Our next question is come from the line of Scott <unk> with C. L. King. Please proceed with your questions.
Good morning, guys.
Good morning, Sean.
I jumped on a little late but did you give the comps by month in the quarter.
I did not but ill just say that they were all.
Between 14 and 15%.
For all three months very very tight group in a very consistent and obviously that carried on into October at 14%.
Okay, and what about regional performance.
Are you seeing strong growth across the board, whether it's up at mid Atlantic northeast.
Could you talk about that yes.
All regions were double digits, the northeast and the west outperformed a little bit year over year, just because I think they were underperformed last year at this time, so they caught up on a two year basis everything is pretty consistent.
And you said that basically everything.
Most everything is back to pre pandemic levels.
Could you share with us if there's any category in particular that is not why that's not the case.
Yeah.
Yes, I think I mean, the only the only area, where we're seeing some some pressure still is on our oil change business to the consumer.
Migrating back to our full service offering.
It's taken a little bit.
Longer than some of the other case.
But we look with that still.
A positive trend in our oil category, just just lagging the other categories.
Alright, and just last question bigger picture.
You guys are not giving.
Give me guidance still.
Clearly it seems like the business is back on the much more firmer footing or are we getting closer in the next quarter. So if things remained at this level.
Reinstating guidance.
Scott, it's something that we're considering without we're asking ourselves that ourselves, but right now we're still very much managing COVID-19.
And we don't want to really put the cart before the horse we wanted to get through the winter selling season.
Got it that's fair enough. Thanks again, thank you. Thanks.
Thanks, Scott Thanks, Scott.
Thank you. Our next question is coming from the line of John Healy with Northcoast Research. Please proceed with your questions.
Thanks.
Mike I wanted to ask a big picture question numerous times in the call you talked about in store execution, but just as it relates to the.
The initiative of outside purchase management, and kind of sourcing and product screens.
He sort of takeaways there now that you're six months into bandwidth accompany that.
Might be.
More major initiatives that could take place on that front.
And now that Youre kind of inside the company as opposed to kind of sell into the company are working with the company externally.
Any sort of observations on product screens in sourcing.
The type of product that you are ultimately putting on vehicles.
No.
It's really it's a good question and thank you for asking that John.
Let me separate the two on tires.
Starting with tires.
From parts on the tire category just in time inventory is extremely important as well as parts, but the tire.
<unk> I can't stockholder tire and buyback groups, so rely on partnerships and becoming bigger with fewer.
I think he is very relevant to the tire category. There is a lot of capacity out there in our stores really demand everyday delivery and that's going to require partnerships on tire. So it also navigates our supply chain issues and any constraints that we might have in the future.
On supply now on the parts category.
I think this has been really a <unk>.
Success of the team is funneling, all our purchases to our preferred suppliers on the parts side and that way, we can manage the quality, which you already highlighted.
Also the assortment that we bring to life for our customers. So they can choose good better best.
And it gives our team an opportunity to potentially sell through new categories in the past I've talked about how do we bring to life. We're very good around the wheel, meaning brakes and tyres, how do we start moving into that very profitable profitable.
Profitable business of under Hood, and Thats going to require us to really expand beyond our internal supply chain really really relying on in our preferred providers.
To bring the training to life as well as the parts at the local level.
Great. That's Super helpful. And then just wanted to ask another question on EV.
We've heard this kind of talked about a little bit in the industry.
Eric vehicles, one of the observations byproduct of them is that it seems to create more and different type of aware on tires and tire replacement activity actually maybe has increased.
Increased because of EV, just kind of curious if you have seen anything like that.
Anecdotally.
Conclusion, you guys have made by looking at your stores.
Just your view on what the EV category could do 10 ultimate tire replacement demand longer term.
On the EV side, we do not I have nothing new to share on the on the category management perspective, we are absolutely seeing the cars in our shops, we are replacing tires on the electric vehicle and Thats all mixed models and we just feel a lot of upside.
When you look at the functional fluids everything is changing that business model and we will be ready for it now in the meantime, changing tires on an electric vehicle just like an internal combustion engine vehicle is exactly the same in many ways. So our teams are very much we're ready to take care of those cars and then we can expect the briefs they have suspension problems.
<unk> capacity, we just see a lot of upside as the industry. If it does go quicker.
Be ready for it and Theres a lot of upside from one room.
Great. Thank you so much.
Thank you.
Thank you there are no further questions at this time I would like to turn the call back over to management for any closing remarks.
Thank you for joining US today. This is an exciting time to be part of Monro. We are a strong foundation to build upon to create long term value for all our stakeholders I look forward to keeping you updated on our progress have a great day.
Thank you for your participation. This does conclude today's teleconference. You may disconnect. Your lines at this time and have a great day.