Executive Summary

Q1 FY2026 delivered a return to top-line growth with sales up 2.7% to $301.0M, comps +5.7%, but GAAP EPS was a loss of $0.28 due to store closure and consulting charges; adjusted EPS was $0.22, flat year over year .
Gross margin compressed by 170 bps YoY to 35.5% on wage inflation, tire mix trade-down, and self-funded promotions; occupancy leverage partly offset pressure .
Against S&P Global consensus, Q1 beat: revenue $301.0M vs $296.1M*, EPS $0.22 vs $0.148*, EBITDA $29.6M* vs $26.7M*; five estimates for both revenue and EPS (bold beat vs. estimates) .
Management completed closure of 145 underperforming stores, expects sales headwind of ~$45M in FY26, and continues to withhold formal guidance but provided modeling assumptions; preliminary July comps +2% (sixth consecutive month of positive comps) .
Near-term stock catalysts: continued positive comps, execution on merchandising/tariff mitigation and ConfiDrive-enabled mix shift; risks include persistent gross margin pressure from inflation and tariffs .

Values retrieved from S&P Global for consensus and EBITDA marked with an asterisk (*).

What Went Well and What Went Wrong

What Went Well

Comps +5.7% with tire units +3% and notable strength in higher-margin service categories: front-end/shocks +26%, brakes +9%, batteries +9%, maintenance +4%; alignments flat .
Adjusted EPS $0.22 matched prior year despite pressures, and adjusted operating income reached $14.0M (4.7% margin), indicating underlying operational resilience after adjusting for one-time items .
Management reports preliminary July comps +2% and “sixth consecutive month of consistent comparable store sales growth,” reflecting momentum from ConfiDrive, targeted marketing, and store optimization .

Quotes:

“Our profitability on an adjusted diluted earnings per share basis was in-line with the prior year first quarter… preliminary fiscal July comps are up 2%” — Peter Fitzsimmons, CEO .
“We believe this will allow us to deliver year-over-year improvement in our adjusted diluted earnings per share in fiscal 2026.” — Brian D’Ambrosia, CFO .

What Went Wrong

Gross margin fell 170 bps YoY to 35.5% on wage inflation (+170 bps technician labor as % of sales), tire mix trade-down, and increased self-funded promotions; only partly offset by occupancy leverage (120 bps) .
GAAP results were impacted by $14.8M of store closing costs and $4.7M of consultant costs tied to the improvement plan, driving a GAAP net loss of $8.1M and GAAP EPS of -$0.28 .
Management did not issue formal FY26 guidance due to tariff/macro uncertainty; gross margin expected to remain pressured throughout FY26, narrowing vs prior year only later in H2 .

Financial Results

Headline Results vs Prior Periods and Estimates

Metric	Q3 2025	Q4 2025	Q1 2026
Revenue ($USD Millions)	$305.769	$294.992	$301.035
GAAP Diluted EPS ($)	$0.15	-$0.72	-$0.28
Adjusted Diluted EPS ($)	$0.19	-$0.09	$0.22
Comparable Store Sales (%)	-0.8% (adj. for days)	+2.8% (adj. for days)	+5.7%
Gross Margin (%)	~34.3% (104,803/305,769)	~33.0% (97,280/294,992)	35.5%

Notes: Q3 and Q4 gross margin percentages are calculated from reported gross profit and sales.

Estimates vs Actual (S&P Global Consensus)

Metric	Consensus (Q1 2026)	Actual (Q1 2026)
Revenue ($USD Millions)	$296.135*	$301.035
Primary EPS ($)	$0.148*	$0.22 (Adjusted)
EBITDA ($USD Millions)	$26.708*	$29.625*

Values retrieved from S&P Global*. Number of estimates: Revenue (5), EPS (5).

Operating Metrics and Balance Sheet

KPI	Q3 2025	Q4 2025	Q1 2026
Operating Income (GAAP, $USD Millions)	$9.963	-$23.846	-$6.075
Adjusted Operating Income ($USD Millions)	N/A	N/A	$14.034
Stores Open (End of Quarter)	1,263	1,260	1,115
Cash and Equivalents ($USD Millions)	$10.161	$20.762	$7.801
Credit Facility Availability ($USD Millions)	$521 (liquidity)	$508.7	$398.4

Segment/Category Breakdown (Comps by Category)

Category	Q3 2025	Q4 2025	Q1 2026
Front-end/Shocks	+6%	+27%	+26%
Brakes	-6%	+2%	+9%
Batteries	+30%	+25%	+9%
Tires	-1%	+2%	+4%
Maintenance Services	-2%	+1%	+4%
Alignments	+13%	-1%	Flat

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
FY26 Formal Guidance	FY2026	Not provided	Not provided; management provided assumptions	Maintained no formal guidance
Comparable Store Sales	FY2026	Not provided	Expect YoY comps growth in FY26	New assumption disclosed
Total Sales Impact from Store Optimization	FY2026	Not provided	Reduce total sales by ~$45M	New assumption disclosed
Gross Margin	FY2026	Not provided	Remain pressured; narrowing later in H2	New assumption disclosed
Adjusted Diluted EPS	FY2026	Not provided	Expect YoY improvement	New assumption disclosed
Operating Cash Flow & Dividend	FY2026	Not provided	Expect sufficient OCF to fund priorities incl. dividend	New assumption disclosed
CAPEX	FY2026	Not provided	$25M–$35M	New assumption disclosed
Quarterly Dividend	Q1 FY26	Approved $0.28 (May)	Paid $0.28 on June 17, 2025	Executed per prior approval

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 & Q4 FY2025)	Current Period (Q1 FY2026)	Trend
ConfiDrive digital inspection	Drove sequential improvement in service category comps (Q3) ; continued improvement in Q4	Clear impact on unit/sales in tires and high-margin services; more to do on effectiveness	Strengthening execution
Tariffs/Merchandising	Pressure from tire mix and promotions (Q3/Q4)	New SVP Merchandising; supplier talks; tariff mitigation efforts; impact less than feared in Q1	Active mitigation; early progress
Consumer trade-down/promotions	Value-oriented consumers trading down to tier-3 tires; self-funded promos (Q4)	Similar dynamics continue; promos increased; tier-3 mix pressured margin	Ongoing headwind
Store optimization	Identified 145 closures; initiated plan (Q4)	Completed 145 closures; expect positive cash flow from real estate	Executed; benefits to build
Traffic and ticket	Extreme weather impacted traffic (Q3); sequential comps improvement (Q4)	Traffic flat; ticket up; targeted marketing underway across several hundred stores	Ticket up; traffic targeted
Guidance posture	No guidance (Q3/Q4)	No formal guidance; assumptions provided; gross margin pressured FY26	Maintained stance

Management Commentary

Prepared remarks emphasized four improvement pillars: closing unprofitable stores, merchandising productivity (including tariff mitigation), profitable customer acquisition/activation, and improving customer experience/selling effectiveness .
“We maintained prudent operating cost control… reduced inventory levels by approximately $10 million… adjusted diluted EPS in-line with the prior year… preliminary July comps are up 2%” — CEO Peter Fitzsimmons .
“We believe this will allow us to deliver year-over-year improvement in our adjusted diluted earnings per share in fiscal 2026… CAPEX $25–$35M” — CFO Brian D’Ambrosia .
“Tariff impact in the first quarter was not as significant as originally anticipated… minimum advertised pricing adjustments mitigated impact on gross margin rate” — CEO Peter Fitzsimmons .

Q&A Highlights

SG&A trajectory: underlying cost control strong; closures only benefited June; expect flat SG&A vs prior year in remaining quarters .
Gross margin bridge: +170 bps higher technician labor, +120 bps higher material cost (tier-3 tire mix, promos), and -120 bps occupancy leverage benefit; expect narrowing vs prior year as year progresses .
Traffic vs ticket: traffic flat, ticket steadily up; marketing tests underway with digital and local media to drive targeted traffic .
Store closures: one month impact in Q1; full-quarter benefits ahead; real estate exit process (including 40 owned stores) expected to generate positive cash flow; no mortgages on properties .
Outlook tone: gross margin to remain pressured FY26; anticipate YoY improvement in adjusted EPS; continued positive comps trend .

Estimates Context

Q1 FY2026 beat consensus across revenue and EPS: revenue $301.0M vs $296.1M*, adjusted EPS $0.22 vs $0.148*; EBITDA $29.6M* vs $26.7M*; five estimates for both revenue and EPS (bold beat) .
Implications: Street likely to raise near-term revenue and adjusted EPS estimates, but maintain cautious gross margin trajectory given ongoing inflation/tariff dynamics and consumer mix; FY26 formal guidance still withheld .

Values retrieved from S&P Global for consensus/EBITDA*.

Key Takeaways for Investors

Underlying demand is improving, with comps momentum and service mix aided by ConfiDrive; sustained execution here is central to margin recovery and EPS traction .
Closure of 145 underperforming stores is complete; expect ongoing occupancy and opex leverage plus positive real estate cash flows as exits finalize over ~12 months .
Gross margin pressure persists near term on wage inflation, tire mix, and promotions; expect narrowing later in FY26 as comparisons ease and merchandising/tariff mitigation gains traction .
Capital allocation remains intact: sufficient operating cash flow expected to fund priorities including dividend; liquidity is ample with ~$398M availability and ~$$8M cash at quarter-end .
Trading setup: near-term upside skew if comps stay positive and margin pressure abates faster than expected; risk remains from tariffs and continued consumer trade-down forcing promos .
Medium-term thesis: focus on mix shift toward higher-margin services, merchandising productivity under new SVP, and targeted marketing to high-value customers to drive sustained EPS improvement .
Watch items into Q2/Q3: tariff developments, promo intensity, traffic uplift from marketing, realized occupancy savings, and cadence of real estate monetization .

MONRO, INC. (MNRO)·Q1 2026 Earnings Summary