Monroe (NASDAQ: MNRO) shares rose on Wednesday after the company reported better-than-expected quarterly sales.
For its fiscal third quarter, the New York-based undercarriage repair and tire services company posted earnings of $0.43 per share, in line with expectations. Meanwhile, $335.2 million was a smaller slowdown than Wall Street expected. Comparable store sales rose 5.6% in the quarter, well above the consensus estimate of 3.3%.
While gross margins were down 150 basis points year-over-year, management indicated that a contraction in consumer trade was helping sales. Management commentary suggests the trend has allowed the company to gain market share.
“We have been actively repositioning our tire range to give our customers the right tire at the right price,” CEO Michael Broderick told analysts. “We’re staying relevant at entry-level price points to give customers more choice and more value. In preparation for the winter sales season, we have raised inventory levels in our stores with expanded snowpack offerings, more established regional inventory for starting price and tire replacement, and an upgraded inventory system that allows for daily review and replenishment.”
On that note, margins are expected to remain under pressure in the final quarter of fiscal 2023. As such, the company said it will continue to “manage the mix within product categories to improve profitability and take opportunistic pricing actions” in the current quarter.
“We also expect continued improvement in our operating cash flow, driven by continued reductions in working capital, our balanced approach to returning capital to shareholders, as well as the completion of value-enhancing acquisitions, will significantly increase our return on invested capital,” concluded CFO Brian D’Ambrosia.
Shares of Monro Inc. (MNRO) have increased 5.49% on Wednesday.
Read the earnings call transcript.