Monro Muffler Brake (NASDAQ:MNRO) executives told investors the company made “another step forward” in its fiscal third quarter of 2026 as it continued executing a performance improvement plan centered on marketing, store execution, merchandising, and monetizing real estate tied to recently closed locations.
On the call, President and CEO Peter Fitzsimmons said the company’s comparable-store sales improved as the quarter progressed, following softness in October. CFO Brian D’Ambrosia added that third-quarter comparable-store sales at continuing locations rose 1.2%, with comps down 2% in October, up 4% in November, and ending December up 1%.
Marketing expansion and “readiness” checks
He said the company also completed an “operational readiness assessment” to identify which stores were best positioned to receive marketing support and implemented a measurement framework to track marketing’s impact on metrics such as calls, sales, and gross profit dollars.
Monro also continued to activate its CRM database with offers aimed at getting existing customers to revisit stores for additional services. In addition, the company expanded call center support to 114 additional store locations during the quarter, bringing the total to more than 830 stores supported by the call center, with plans to add the remaining stores “in the near future,” according to Fitzsimmons.
In the Q&A, Fitzsimmons said stores receiving additional marketing support have performed better on calls, comparable-store sales, and gross margin dollars than they did previously and compared to the broader network. He also said stores not yet receiving digital marketing support may be understaffed or have operational issues, and in some cases could benefit more from CRM than digital marketing.
Store execution: inspections and field organization changes
Fitzsimmons highlighted ongoing efforts to expand use of the company’s ConfiDrive inspection tool on every customer vehicle. He said the company is working with technicians to ensure inspections are accurate and fully completed, enabling store managers to provide customers with transparency on vehicle condition and return “a safer vehicle.”
He also recapped a field realignment following the closure of 145 underperforming stores earlier in fiscal 2026. Fitzsimmons said the changes reduced the number of district managers but increased overall district manager quality, while creating a more streamlined organization. He pointed to new analytical tools, including a “District Manager Toolkit,” a labor force optimization capability, and field compliance support specialists intended to reduce administrative tasks for district managers so they can focus more on training and coaching store teams.
Merchandising focus and tariff commentary
On merchandising, Fitzsimmons said Monro continued building its vendor and assortment strategy, with a focus on tire inventory availability entering the fall and early winter selling season. He said the company leveraged supplier and distributor relationships to expand availability as needed and is refining its tire assortment for the next season, aiming to narrow the overall assortment to better serve customer needs.
He added the company continues to modify its assortment and availability of stock parts to support growth in service.
Regarding tariffs, Fitzsimmons said Monro managed impacts on product acquisition costs and market pricing, noting tariffs “have not been as significant” on customer pricing or product cost as the company had anticipated when higher tariffs were first announced. He said management believes it has struck a balance between costs and price adjustments, helping maintain gross margins amid uncertainty.
Real estate dispositions following store closures
Monro provided additional detail on monetizing real estate tied to the 145 closed stores, including 40 owned locations. Fitzsimmons said that during the third quarter, the company exited 32 leases and sold 20 owned locations, generating proceeds of $17.3 million. Fiscal year-to-date, Monro has exited 57 leases and sold 25 locations, resulting in cumulative proceeds of $22.8 million.
In Q&A, D’Ambrosia noted that not all remaining locations are owned properties, as some are leases. For owned stores still to be sold, he said the assets are recorded as “assets held for sale” at approximately $5 million (a little less than $5 million), which he described as the minimum value the company expects to achieve.
Quarterly financial results and outlook
D’Ambrosia reported third-quarter sales decreased 4% to $293.4 million, primarily due to the impact of store closures, partially offset by the 1.2% increase in comparable-store sales at continuing locations. He said the tire category was up 5%, while tire units were down 1%, and management believes Monro outperformed the industry in the quarter.
Gross margin expanded 60 basis points year-over-year to 34.9%. D’Ambrosia attributed the increase mainly to lower material costs and lower occupancy costs as a percentage of sales, partially offset by higher technician labor costs as a percentage of sales due largely to wage inflation. In Q&A, he further broke down the year-over-year drivers as:
- +80 basis points from lower material costs, driven by better price and mix in service and tires, partially offset by a higher tire mix
- +30 basis points from occupancy leverage, related to higher comparable-store sales and store closures
- -50 basis points from technician labor costs as a percentage of sales, attributed to wage inflation
Total operating expenses were $83.8 million (28.6% of sales) versus $94.8 million (31% of sales) a year ago. D’Ambrosia said the decline reflected $14 million of net gains from real estate dispositions and $7.3 million of lower costs from store closures, partially offset by $6.2 million of higher marketing costs and $4.7 million in consultant-related costs tied to the operational improvement plan.
Operating income rose to $18.6 million (6.3% of sales) from $10.0 million (3.3% of sales). Adjusted operating income was $10.3 million (3.5% of sales) versus $11.7 million (3.8% of sales) in the prior-year period. Net income was $11.1 million compared to $4.6 million a year ago, and diluted EPS was $0.35 versus $0.15. Adjusted diluted EPS was $0.16 compared with $0.19.
Fitzsimmons said the company reduced inventory by more than $7 million in the quarter, bringing total inventory reduction to more than $28 million (16%) since the end of March over the prior nine months. He also said sales momentum continued into January, with preliminary comparable-store sales up almost 1%.
Looking ahead, management said it continues to expect year-over-year comparable-store sales growth for fiscal 2026 and expects gross margin for the full year to be consistent with fiscal 2025. D’Ambrosia said the store optimization plan is expected to reduce total sales by approximately $45 million in fiscal 2026, and Monro plans to reinvest SG&A savings from closed stores into additional marketing to support growth at continuing stores. The company reaffirmed expected capital expenditures of $25 million to $35 million and said it expects to generate sufficient cash flow to fund capital allocation priorities, including the dividend.
On near-term demand drivers, Fitzsimmons said the company expects a “tailwind” from higher expected consumer tax refunds and viewed a challenging winter as supportive for demand. He also said Monro had stores back online after winter storm disruption and anticipated incremental sales as consumers address vehicle safety needs.
About Monro Muffler Brake (NASDAQ:MNRO)
Monro Muffler Brake (NASDAQ:MNRO) is a leading provider of undercar repair and maintenance services for light vehicles in the United States. The company’s core offerings include brake systems, exhaust systems, steering and suspension repairs, tire sales and service, oil and lube changes, wheel alignment, multi-point inspections, and state vehicle inspections. Monro serves both retail customers and fleet accounts, focusing on fast, reliable service and preventive maintenance to help extend vehicle life and safety.
Headquartered in Rochester, New York, Monro was originally founded in 1957 and has grown through a combination of organic expansion and strategic acquisitions.
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