Monro : Q4 2026 Earnings Transcript

27-Ma y-2026

Monro, Inc. (MNRO)

Q4 2026 Earnings Call

CORPORATE PARTICIPANTS

Felix Veksler

Vice President-Investor Relations, Monro, Inc.

Peter D. Fitzsimmons

President, Chief Executive Officer & Director, Monro, Inc.

Brian J. D'Ambrosia

Executive Vice President & Chief Financial Officer, Monro, Inc.

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OTHER PARTICIPANTS

Thomas Wendler

Analyst, Stephens, Inc.

David Lantz

Analyst, Wells Fargo Securities LLC

Bret Jordan

Analyst, Jefferies LLC

Brian Nagel

Analyst, Oppenheimer & Co., Inc.

John Healy

Analyst, Northcoast Research Partners LLC

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MANAGEMENT DISCUSSION SECTION Operator: Good morning, ladies and gentlemen, and welcome to Monro's, Inc.'s Earnings Conference call for the Fourth Quarter and Full Year Fiscal 2026. 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. [Operator Instructions] And as a reminder, 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 Felix Veksler, Vice President of Investor Relations at Monro. Please go ahead.

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Felix Veksler

Vice President-Investor Relations, Monro, Inc.

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.monro.com/investors.

If I could draw your attention to the Safe Harbor statement on slide 2, I'd like to remind participants that our presentation includes some forward-looking statements about Monro'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 Monro's filings with the SEC and in our earnings release. 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 be substitutes for comparable GAAP measures.

Reconciliations of such supplemental information to the comparable GAAP measures are included as part of today's presentation and in our earnings release.

With that, I'd like to turn the call over to Monro's President and Chief Executive Officer, Peter Fitzsimmons.

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Peter D. Fitzsimmons

President, Chief Executive Officer & Director, Monro, Inc.

Thank you, Felix, and thanks to everyone for joining us. Great to be with you today.

This morning I'd like to update you on our progress and the momentum we've continued to build at Monro despite a challenging fourth quarter. Since we completed our store closure program nearly a year ago, my comments today will focus on the three remaining key performance improvement initiatives you are already familiar with, which are driving profitable customer acquisition and activation, improving our store-based customer experience and selling effectiveness and increasing merchandising productivity, which includes mitigating tariff risk. After that, I'll briefly touch upon our fiscal fourth quarter results as we continue to implement our performance improvement plan to enhance Monro's operations, drive profitability, and increase shareholder returns.

Let's start with driving customer acquisition and activation on slide 3. During the fourth quarter, we continued to refine our marketing program by adjusting digital marketing spend, further refining our CRM outreach and optimizing call center support to more than 830 stores. We are more knowledgeable today about how to adjust our ad spending as a result of all the information we have gathered since we first introduced digital marketing last July. We use industry-standard and company-specific metrics to determine where our marketing dollars have the most impact.

Our objective is not to only continue driving new guests to our store locations, but also to improve our ability to retain existing customers, especially those of highest value to Monro. And as a reminder, these are repeat customers that visit us over a number of years, and they choose us because we provide both the tire and auto aftermarket services that meet their vehicle needs.

We have also enhanced our ability to allocate the appropriate method of advertising, that is, digital, CRM and other media, as well as the specific content, tires, front end/shocks, et cetera, to meet specific market or customer needs. For example, extra tire marketing in one district, incremental oil traffic building in another, and cross-category marketing through CRM, that is, brakes, tires, oil, to the multi-service need customers that we've already identified as particularly attractive. This does not require us to increase marketing spend from our current run rate, and our efforts to optimize may trim current spend. Nine months ago, our marketing effort was similar across our entire store network. Now, we have the capabilities to customize our approach to a variety of regional needs.

Now, let's discuss the things we're doing to improve the customer experience and selling effectiveness in our stores. Our ConfiDrive inspection tool has become the cornerstone of our customer experience transformation. We've successfully expanded its usage to nearly every customer vehicle that enters our service bays, ensuring comprehensive vehicle assessments across our entire network.

During the fourth quarter, we intensified our training efforts with technicians to guarantee both the completion and accuracy of these critical inspections. The ConfiDrive process enables our store managers to provide transparency about vehicle condition to our customers. Our goal is to help our guests identify and prioritize what they need to do to keep their vehicles safe. Our ConfiDrive process is designed to build trust with our customers through a quality diagnostic supported with pictures to truly show areas that require attention.

Safety, trust and confidence on the road is what we want to deliver for our customers. This transparency isn't just about building trust; it's about fundamentally changing how customers perceive automotive service. When customers can understand exactly what we're seeing through detailed visual documentation, it eliminates the skepticism that has historically plagued our industry.

In addition to ConfiDrive, we have further developed our District Manager Toolkit, which we first described on a recent earnings call, to more precisely identify which levers to pull to generate incremental sales, improve gross margin, or adjust staffing levels. We believe this has allowed us to evolve our analysis from simply identifying sales trends to a more holistic view of how we would improve store contribution by enabling our district managers to better coach each of their store teams.

These tools, coupled with our efforts to steadily increase the quality and capabilities of our field teams, will allow us to drive greater accountability with sales improvement and higher store contribution over time. For example, we have recently rolled out an enhanced District Manager Toolkit to approximately 150 stores. This enhancement

focuses on gross margin opportunities at underperforming stores, and enables us to adjust operating performance at the local level. We are encouraged by the profit improvement we've seen in many of these store locations. We expect this process to improve store profitability across the network as we roll this initiative out further.

Now, let's turn to merchandising, including mitigating tariff risk. During the fourth quarter, we nearly completed the reset of our tire inventory across stores, shifting to a more focused assortment and guest-aligned offering that is resonating with customers despite challenging market conditions. The new assortment has helped us navigate an ongoing customer shift to lower-cost tier 4 and opening price point tires, a trend that continues to pressure the overall industry.

To the fourth quarter, we turned our focus to improving assortments and offerings across our parts categories applying a strategic category management framework to develop consumer-centric product and service offerings. This isn't just about having products on shelves; it's about ensuring we have the right products available when customers need them, backed up by strong in-stock and on-demand inventory availability.

A key driver of our assortment progress has been our intensified work with vendor partners. We strengthened strategic relationships with our core suppliers while simultaneously working with our supplier base to improve inventory availability to ensure our stores remain consistently stocked. We're investing in new demand and inventory planning capabilities, which are enabling us to manage supply more precisely at the same time as we expand in-store and same-day availability. This balance requires sophisticated forecasting and rapid response capabilities that we're still building out.

As it relates to potential pricing adjustments, we continue to work closely with suppliers to understand and manage costs in what has become an exceptionally dynamic environment. As in the past, we expect to deliver competitive prices for the services we offer also taking into account market conditions. We're closely monitoring potential product cost impacts from new tariffs as well as ongoing geopolitical tensions in the Middle East and we're proactively developing strategic pricing scenarios to protect profitability while also remaining competitive.

We're particularly focused on expanding our share in tires and oil, two of our key traffic driving categories, but we're doing so in an environment where consumers are demonstrably continuing to defer their spend on high ticket categories such as tires. This creates a challenging dynamic where we need to drive volume while managing margin pressure. Pricing will continue to be a critical lever as we work to maintain the right balance between customer value and margin performance.

Now, let me briefly touch on our fiscal fourth quarter results, which Brian will cover in more specific detail in just a few moments.

Turning to slide 4 of our presentation materials. Our fourth quarter was challenging with comparable store sales declining 2%. This performance reflects the difficult operating environment in the full-service auto aftermarket we've been navigating, but it also demonstrates the resilience of our operational improvements in the face of significant headwinds. As we believe was the case with other tire sellers, the primary driver of our comp store sales decline was persistent weakness in tire units that began in fiscal January and continued throughout the quarter. We experienced a 5% decline in tire units during the quarter, which we believe aligns with broader industry trends.

Our tire category was pressured as consumers continued to defer spending in higher-ticket categories and gravitated toward lower-cost alternatives. Further, fiscal February presented additional challenges when severe winter weather across our geographic footprint forced temporary store closures and significantly reduced customer traffic. Similar to what other automotive service companies experienced, the extreme weather disrupted normal service patterns and kept customers off the roads during what would have been a busy winter maintenance period. However, we saw improvement as we progressed through the quarter. Both comparable store sales and tire units showed sequential improvement in fiscal March, partially recovering from the February weather disruptions. Store traffic also improved sequentially, giving us confidence that the underlying demand for our services remains intact despite a challenging backdrop.

One of our most significant accomplishments during the quarter was the transformation of our tire screen across our store network. This wasn't simply a cosmetic change. We fundamentally reimagined how we present tire options to customers, making the selection process more intuitive and aligned with customer needs and budgets. Despite the overall sales challenges, our higher-margin service categories continued to deliver value to our many full-service customers and reinforces our strength as a full-service provider. This capability serves as proof that our store teams are effectively utilizing ConfiDrive to identify and communicate service needs to customers. When customers can see documented evidence of their vehicle's condition, they're more likely to spend on necessary maintenance and repairs, even in a constrained spending environment.

Our gross margin performance was a bright spot, expanding 90 basis points year-over-year to 33.9%. This improvement demonstrates productivity gains from our labor force even as we navigate cost pressures and shifting consumer preferences towards lower-tier products. Importantly, we maintained our marketing investment throughout the quarter despite the sales headwinds. While it might have been tempting to reduce marketing spend during uncertain times, we firmly believe that backing away from marketing during challenging periods would be counterproductive to our long-term growth objectives. Our customers need to know we're here and available to serve them, particularly when economic uncertainty makes them more selective about where they spend their automotive dollars.

As a reminder, Monro delivered positive comp store sales in fiscal 2026 for the first time in three years, closed 145 stores that were not going to reach our performance expectations and dramatically improved our inventory position. And while the fourth quarter tested our resolve, our results for the full year of fiscal 2026 also validate that our strategic initiatives are working well over time and position us to capitalize when market conditions improve. And while our business rebounded in April with comp store sales that were up almost 1%, our May month to-date comps are down approximately 3%. We believe the primary driver is that certain customers are feeling increased pocketbook pressure as a result of recent increases in gas prices as well as other related costs.