Monro Muffler Brake Inc. on Thursday reported first-quarter profit missed Street estimates, and the company announced a planned leadership change.
President John Van Heel will assume the role of CEO on Oct. 1, the company said. Chairman and CEO Robert Gross will be appointed executive chairman and continue to serve on a half-time basis with a focus on strategy, acquisitions and investor relations.
Net income fell nearly 25 percent to $11.6 million from $15.4 million in the first quarter a year ago. Diluted earnings per share decreased 25 percent to 36 cents a share, compared with 48 cents a share. Sales for the quarter ended June 30 increased nearly 3 percent to $169.2 million, up from $164.8 million.
Analysts had expected diluted earnings per share of 38 cents on sales of $166.42 million.
Comparable store sales—or sales at stores open at least one year—decreased 7.2 percent in the first quarter, compared with a 2.3 percent increase a year ago. Declines primarily were centered around exhaust and front end/shock service, the company said.
“As anticipated, the first quarter was challenging as the current economic environment weighed more heavily on consumers,” Gross said in a statement. “Customers are deferring and trading down from higher cost automotive maintenance and repair purchases.”
Gross noted the availability of acquisition candidates at good prices has improved, while the company’s business model continues to help Monro successfully acquire and profitably integrate target companies.
Monro has signed a definitive agreement to acquire 17 stores from Tuffy Associates Corp., consisting of 13 stores in Milwaukee, and four stores in South Carolina. Tuffy’s annual sales equal roughly $9 million and the purchase extends Monro’s footprint to 20 states.
The Wisconsin-based stores will be rebranded as Monro, while the South Carolina stores will be rebranded as TreadQuarters, the company said. Monro expects to close the deal in August.
For the second quarter, Monro anticipates a comparable-store sales decrease of 3 percent to 6 percent. The company expects diluted earnings per share of 35 cents to 40 cents, compared with 47 cents in the second quarter last year.
Monro has narrowed its full-year guidance to diluted earnings per share of $1.50 to $1.65, compared with $1.69 per share in 2012. The company expects sales for the year of $715 million to $735 million.
Gross has served as CEO since 1999 and as chairman since 2007. Van Heel joined the company in 2002 and was named president in 2008.
“We have been planning this transition internally for some time and are confident that it will be seamless. John and I have worked together closely for nearly 10 years and he has been instrumental in helping to build the Monro business over the years,” Gross said. “We are aligned on the company’s business strategies and objectives, and share a common vision for the future of Monro.”
Shares of company stock (Nasdaq: MNRO) were down more than 8 percent at $32.23 in mid-morning trading.
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