Monro ( NASDAQ: MNRO ) reported comparable store sales increased 1.3% in FQ2 vs. +1.5% consensus. The comparable sales gain was driven by an approximate 10% comparable store sales increase in approximately 300 of the retailer's small or underperforming stores.
Comparable store sales were up 6% for tires and 1% for maintenance services during the quarter. Comparable store sales decreased approximately 5% for brakes and front end/shocks and 8% for alignments. The overall comparable sales gain came against a tough mark from a year ago when comparable store sales rose 14.8%.
Gross margin fell 220 basis points to 35.4% of sales. The decrease was primarily due to a higher mix of tire sales in the retail locations, customer trade down to opening price point tires, as well as parts inflation that MNRO intentionally did not fully pass through to consumers. In addition, incremental investments in technician labor and wages to support current and future topline growth increased labor costs 100 basis points from the prior year.
Net income was reported at $13.1M vs. $21.0M a year ago.
Of note, while MNRO's investments in price and labor impacted gross margin, the retailer gained market share in the tire category in FQ2.
CEO update: "Given the challenges of the current macro environment, we saw stretched consumers trade down to lower priced tire options and defer vehicle maintenance in some of our key service categories."
Notably, Monro ( MNRO ) said it is not providing 2023 guidance at this time.
For further details see:
Monro points to consumer trade-down effect, withholds 2023 guidance