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Monro Muffler Brake Inc. on Thursday reported its second-quarter results, which fell short of Street estimates.
Net income for the second quarter decreased nearly 24 percent to $11.5 million, or 36 cents a share, from $15.1 million, or 47 cents a share, a year ago. Sales for the quarter ended Sept. 29 increased nearly 2 percent to $176.5 million.
Analysts had expected diluted earnings per share of 37 cents on sales of $184.2 million.
Comparable store sales—or sales at stores open at least one year—fell nearly 5 percent in the quarter, compared with a nearly 1 percent decrease in the same period last year. Comparable store sales fell in the areas of tires, alignments, front end work, brakes and exhaust.
“Our second-quarter performance continues to reflect the ongoing challenges facing consumers in the current economic environment,” Monroe president and CEO John Van Heel said. “With high gas and food prices compounded by high unemployment, cautious consumers continue to defer and trade down from higher cost automotive maintenance and repair purchases.”
The sales increase in the quarter was a result of an increase in sales from new stores, including the acquisition of 17 service stores from Tuffy Associates Corp. in Milwaukee, Wisc., and South Carolina.
Monro also announced the acquisition of five former Midas stores in Rochester this month. Financial details of the purchase were not provided, but annual sales for the stores equal roughly $3 million.
The company also has agreed to acquire multiple stores in its markets, with annual sales of $60 million. Monro did not provide further details of the acquisition, which is expected to close in the third quarter.
“Our ability to take advantage of increased acquisition opportunities with our strong balance sheet in this tough sales environment is demonstrated by the acquisitions we have completed so far this year, which combined represent a total of $62 million in incremental annualized sales, or 9 percent growth,” Van Heel noted.
For the six-month period net sales increased more than 2 percent to $345.7 million, from $338.1 million in the same period last year. Net income for the first six months decreased more than 24 percent to $23.2 million, or 72 cents a diluted share, compared with $30.6 million, or 95 cents a diluted share a year ago.
For the third quarter, Monro expects comparable store sales to range from a decrease of 3 percent to remaining flat, while diluted earnings per share will range from 35 cents to 40 cents, compared with 42 cents in the third quarter a year ago.
Monro has lowered its guidance for the full year, anticipating comparable store sales decreases of 2 percent to 3.5 percent, with diluted earnings per share of $1.36 to $1.50, compared with $1.69 diluted earnings a share last year.
“Our long-term outlook for our industry and company remain very positive, though we expect that near-term trends will remain choppy as the economic environment continues to weigh on consumer purchasing behavior,” Van Heel said.
Trends in the third quarter remain challenging, with comparable store sales down roughly 6 percent, he said.
The company expects weather to play a role in improving comparable store sales for the remainder of the fiscal year, and Monro anticipates tire sales in November to improve.
“Historically, we have leveraged our strong business model to continue to expand our operations regardless of the economic or operating environment,” Van Heel added. “This is evidenced by our fiscal 2013 completed and signed acquisitions, which represent at least $122 million, or 18 percent in annualized sales growth.
“These transactions continue to expand our market share which, in turn, should allow us to achieve greater economies of scale and result in higher operating margins and earnings going forward.”
Shares of company stock (Nasdaq: MNRO) were up more than 2 percent at $33.81 in early morning trading.
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