Monro (MNRO 7.84%), a major player in U.S. auto service and tire retailing, reported Q1 FY2026 results on July 30, 2025. The most prominent news from the release was a positive turn in sales momentum and the completion of a major store closure plan--but also the persistence of margin pressure and a headline net loss due to one-off expenses. For the quarter, Monro delivered GAAP revenue of $301.0 million, topping analyst estimates by $4.5 million, while adjusted diluted earnings per share (Non-GAAP) of $0.22 came in $0.01 below consensus. Overall, GAAP revenue grew as comparable store sales rebounded, but rising costs and significant non-recurring charges held back reported earnings.
| Metric | Q1 FY26(Ended June 28, 2025) | Q1 FY26 Estimate | Q1 FY25(Ended June 24, 2024) | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.22 | $0.23 | $0.22 | 0.0% |
| Revenue (GAAP) | $301.0 million | $296.5 million | $293.2 million | 2.7% |
| Adjusted Operating Income | $14.0 million | $14.7 million | -4.8% | |
| Net Income (GAAP) | $(8.1) million | $5.9 million | (237.3%) | |
| Comparable Store Sales Growth | 5.7% | (9.9%) | 15.6 percentage points |
Source: Analyst estimates for the quarter provided by FactSet.
Understanding Monro's Business and Recent Strategic Focus
Monro operates a broad network of company-operated and franchised auto service stores across the United States. Its stores focus on tires, wheel alignments, brake and exhaust repairs, and routine maintenance services such as oil changes. The company aims to attract high-value, repeat customers with convenience-focused offerings and an expanding digital experience.
Recent years have seen Monro shift emphasis from rapid expansion through acquisitions to optimizing the performance of its existing store base. The company’s key priorities now include driving customer experience improvements, increasing operational efficiency, and creating value through targeted cost management. Investing in digital processes (like courtesy vehicle inspections) and portfolio rationalization have become central strategies in adapting to evolving industry challenges and consumer needs.
Quarterly Highlights: Sales Growth, Operational Shifts, and Margin Pressure
Monro achieved a 2.7% year-over-year gain in GAAP revenue, driven primarily by a strong 5.7% increase in comparable store sales. This result marks the second consecutive quarter of positive comparable store sales (Q4 FY2025 and Q1 FY2026) following several years of declines. Category-level data shows especially rapid sales gains in front end/shocks (up 26% in comparable store sales) and solid performance in brakes and batteries (both up 9% year-over-year). Comparable store sales for tires and maintenance services each increased 4% year-over-year, while alignment sales were flat. The company credits much of this improvement to its ConfiDrive digital courtesy inspection process, which drove sales and unit growth in its tire and high-margin service categories.
The quarter stands out as a turning point for another reason: completion of a store portfolio review and the closure of 145 underperforming locations. These closures were spread across Monro’s geographic footprint and aimed to improve overall profitability by eliminating persistently unprofitable sites. Store closing costs totaled $14.8 million, in line with prior announcements. The company-operated store count fell to 1,115 from 1,284, sharpening operational focus on its better-performing locations.
Despite sales gains, Monro’s GAAP gross margin fell 170 basis points year-over-year. This was largely due to higher labor costs (reflecting ongoing technician wage inflation) and increased material costs from a less profitable tire mix and elevated promotional offers in Q4 FY2025. These self-funded tire and service promotions, while successful at driving sales, also squeezed profitability. GAAP gross profit declined by 2.1% year-over-year even as revenue rose, highlighting the delicate balance between growth and cost pressures in the current retail environment.
Operating expenses climbed to $113.0 million, or 37.5% of sales, up from $95.9 million (32.7% of sales) in Q1 FY2025. This increase was principally due to $14.8 million in store closing costs and $4.7 million in consultant costs related to the operational improvement plan and store closures. When adjusted for these one-time items, non-GAAP operating income held relatively steady—falling 4.3% year-over-year. The company's net loss mainly reflects these restructuring actions. Monro maintained its regular cash dividend of $0.28 per share during the quarter.
Looking Ahead: Guidance, Watchpoints, and Financial Flexibility
For the near term, Monro has not provided formal financial guidance for fiscal 2026. Management cited ongoing uncertainty around potential tariff impacts and lingering economic risks as the main reasons for withholding an outlook. However, leadership did note that Comparable store sales growth was tracking at 2% for July FY2026, which, if maintained, would mark six consecutive months of improving comparable store sales for Monro in FY2026.
In the coming quarters, investors should watch several areas: trends in gross margin and the impact of focusing resources on the core store base. Additional points to monitor include labor market conditions (especially technician wage inflation), the company’s approach to promotional pricing, and the outcome of any potential tariff negotiations. Monro maintains significant liquidity, with $398.4 million undrawn on its credit facility as of quarter-end. The quarterly dividend was unchanged at $0.28 per share.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
