Monro Muffler Brakes
Fourth-quarter revenues moved into the fast lane, increasing by 22% compared to the same period a year ago. Comparable same-store sales were equally impressive, higher by 7.3%. This time last year, comps ran on fumes, down 0.4%.
Monro's customer traffic levels benefited from double-digit gains in tire and maintenance sales, improving 18% and 11%, respectively. Once Monro managed to get cars into the shop, the company further capitalized on strong sales from its alignment service, which grew by 33%. Customers and their cars appear to have hit one too many potholes on winter weather-beaten roadways this season -- I know my poor vehicle has.
On the topic of profit margins, the picture gets a little murkier. On one hand, the company did make improvements to gross margins -- 38% this quarter compared with 36.8% last year. But one part of this improvement came at the expense of operating margins when advertising credits were shifted from its SG&A (selling, general, and administrative) line to cost of sales.
As a result, gross margin's improvement was offset by an increase in SG&A expenses as a percentage of sales. The net result? Monro's operating income growth trailed its sales growth, increasing by 16.2% compared to a 22% top-line increase.
While the margins picture is a bit fuzzy, a continued healthy sales environment promises good news ahead. The company projects a 4% to 6% increase in comps in the first quarter of fiscal year 2008; for the full year, comps are expected to come in at 3% to 5%.
This estimate is all the more impressive considering that it faces stiff competition from Midas
But I like what one Fool had to say about the company. CAPS participant NetscribeRetail explained that the do-it-for-me part of the auto repair industry should continue to see a nice boost in business, as cars purchased during the ultra-low-interest-rate days move off manufacturer warranties. "The stock looks ready to move ahead," NetscribeRetail predicted.
It looks like the market agrees, fellow Fool.
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AutoZone is a former Motley Fool Inside Value recommendation.