Tom Wendler

Tom Wendler asked about the impact of the 10 stores refranchised in Q1, following previous larger refranchising activities. He also sought early insights into the Instant Transfer Portal campaign and its effectiveness.

Answer

Lori Flees, President and CEO, Valvoline, clarified there are no plans for large-scale refranchising, and the 10-store transfer in Q1 was not financially material, incorporated into guidance. On the Instant Transfer Portal, she stated that all marketing drives engagement and conversion, and this campaign, inspired by college sports, generated strong creative engagement and brand impressions, benchmarking well against other social performance.

Tom Wendler asked about the impact of the 10 stores refranchised in Q1 on results, given the company has lapped larger refranchising activities. He also inquired about early reads and drivers of the Instant Transfer Portal campaign.

Answer

Lori Flees, President and CEO of Valvoline, stated that the 10-store transfer in Q1 was not financially material and that there are no plans for further large-scale refranchising. She noted that the Instant Transfer Portal campaign generated strong creative engagement and brand impressions, benchmarking well against other social performance, helping to reach new customers.

Tom Wendler asked about the expected pace of new store openings from development agreements, especially in recently refranchised markets.

Answer

CEO Lori Flees noted that while it takes time for new franchise partners to ramp up, they are already seeing positive momentum and an accelerating pipeline. She expressed strong confidence in meeting the full-year new unit guidance of 160-185 stores and the long-term target of 250 units per year by fiscal 2027.

Tom Wendler asked for more detail on the impact of waste oil pricing on Q2 margins and how the company would be affected by rising crude oil prices.

Answer

CFO Mary Meixelsperger reiterated that the impact from waste oil in Q2 and beyond is expected to be negligible, as lower recoveries should be offset by lower product costs. Regarding rising crude prices, she explained there is a lag before it affects lubricant costs and that any significant impact wouldn't be felt until the back half of the year. She noted the company could use efficiencies or pricing to offset increases, as the market typically behaves rationally.

Tom Wendler from Stephens asked about the quantitative impact of the new same-store sales calculation method on the FY25 outlook and the company's expected level of share repurchase activity in the upcoming fiscal year.

Answer

CFO Mary Meixelsperger explained that the updated same-store sales calculation, which added 40 basis points in FY24, is expected to contribute over 50 basis points to the reported comp in fiscal 2025. She also stated that the company has guided to $40 million to $70 million in share repurchases for FY25, contingent on market conditions and other capital deployment opportunities.

Tom Wendler asked if customers who churned after the price increase are expected to return once they see the new price is in line with the market, and what that timeline might look like.

Answer

CEO John Lai clarified the churn uptick was slight, temporary, and immaterial, with levels returning to normal in the second month. CFO Jedidiah Gold noted that since this is their first major UWC price increase, they lack historical data on customer return patterns and have not modeled any, though it's plausible. Lai added that churned members often convert to retail customers rather than being lost entirely.

Tom Wendler from Stephens, Inc. asked about the current sales mix of Tier 3 tires, whether Monro's promotional strategy is intentionally directing customers to this category, and if there has been any slowdown in manufacturer-funded promotions.

Answer

CEO Michael Broderick stated that the Tier 3 tire mix is in the high 20s, around 30%. He confirmed that Monro is actively promoting these tiers to prevent customers from trading down to even lower-quality Tier 4 tires, believing it's better for customer retention. He also affirmed that there has been no slowdown in manufacturer-funded promotions, as the consumer environment remains challenging.

Tom Wendler of Stephens Inc. inquired about the potential impact of the American Tire Distributors bankruptcy filing on Monro's operations and asked for details on the recent tire mix shift towards Tier 3 products.

Answer

President and CEO Michael Broderick stated there is currently no impact from the ATD filing, describing the relationship as "business as usual" and key to supporting tire category growth. He confirmed a significant consumer shift to Tier 3 tires, which grew approximately 30%, reflecting a broader industry trend. Broderick added that Monro is gaining market share in Tiers 1-3 while maintaining a balanced approach to the Tier 4 value segment.