Monro, Inc. (NASDAQ:MNRO) Q3 2023 Earnings Call Transcript

Michael Broderick: Joe, I’ll take that one. I would say that just on the promotional activity, very clearly what we did is, we executed using our supplier partners’ promotional activity similar to really our competition in the marketplace. So we are very disciplined in our approach using our vendor support to be able to drive and attract customers through pricing incentives. I would say, going forward from December into January, I’m actually pleased with, although we had a very strong December in tires driven by tires, and you can see that in my margin. But in January, it actually flipped where I had a very strong break month. So ultimately, January is not a trend, but I actually like to see how we’re meeting our customers’ needs, not just on tires, but also in our service categories.

And I believe most of that’s just driven through all the activities that we’re deploying at the local level. We’re really — we’re leading the customers, not just with tires, but also service categories. And just to really just go back to the fundamentals of this business. We have to have a balanced approach. We have to have tires growing and our service categories growing, brakes leading that service category for us to really drive profitable sales.

Joe Enderlin: That’s super helpful. Thank you. And then maybe as a follow-up, could you maybe provide some thoughts on not this year, but maybe the long-term SG&A growth rate or margin if you are comping at your mid-single-digit comp goal?

Brian D’Ambrosia: Yes, this is Brian. I would say that as it relates to kind of our outlook, maybe just for Q4, we expect some improvement in our gross margin level somewhere between where we ran in Q2 at 35 — mid-35 and where we ran here in Q3, which is just south of 34. So we expect to trend somewhere in that range, improvement off of Q3, though. The gross — I’m sorry, the SG&A, we expect to be about flattish year-over-year. We have a little bit lighter of a volume month or volume quarter in Q4 historically based on seasonality. So we delever a little bit from where we traditionally run in Q3. As it relates to the long term, we’re not providing longer-term guidance. But as we’ve been — as we’ve said, as we achieve our mid-single digit comp growth, we expect to improve both margins as well as leverage our fixed costs and SG&A.

And we think that, that gives us a good path to return our operating margins back to where they’ve run historically, certainly double digits.

Joe Enderlin: Got it. Thanks so much guys. That’s all from me.

Michael Broderick: Thank you, Joe.

Brian D’Ambrosia: Thank you.

Operator: Thank you. Our next question comes from John Healy of Northcoast Research. John, your line is now open.

John Healy: Thank you. Guys, I wanted to dive in a little bit more about the supply side of things. One of the things that surprised me a little bit is you guys talking about the manufacturers may be giving you some more support and rebates on things. So I would just love to kind of hear kind of what you have seen there or maybe how that’s changed? And could that actually begin to buffer gross margin later this year? And are you starting to see or at least this calendar year — are you starting to see manufacturers roll back any price increases or go beyond just giving you maybe some support on the sales side in the field?