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MONRO, INC. (MNRO)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY2026 delivered mixed results: adjusted EPS of $0.21 beat Wall Street consensus, while revenue of $288.9M missed expectations; GAAP diluted EPS was $0.18 flat year over year . Revenue consensus was ~$300.6M and EPS consensus was $0.18, with 5 estimates each; actual revenue $288.9M and adjusted EPS $0.21 represented a beat on EPS and miss on revenue (Values retrieved from S&P Global)*.
  • Comparable-store sales rose 1.1%, the third consecutive positive quarter, as front end/shocks (+18%) and brakes (+6%) outperformed; tires and maintenance were flat, alignments (-5%) and batteries (-21%) lagged .
  • Gross margin expanded 40bps to 35.7% on lower occupancy and material costs, partially offset by higher technician wages; operating margin held at 4.4% .
  • Management reiterated expectations for positive comps in FY2026 and now expects full-year gross margins to be consistent with FY2025, a modestly more constructive outlook; capex remains $25–$35M, and store optimization is expected to reduce FY2026 sales by ~$45M .
  • Post-quarter, the Board adopted a one-year shareholder rights plan in response to Icahn Enterprises accumulating nearly 17% of shares, a potential near-term stock narrative catalyst .

What Went Well and What Went Wrong

What Went Well

  • Comparable sales growth for the third consecutive quarter (+1.1%), with strength in front end/shocks (+18%) and brakes (+6%) supporting margin expansion . Management: “three consecutive quarters of positive comps… gross margin rate… expanded 40 bps to 35.7%” .
  • Adjusted EPS improved to $0.21 vs $0.17 YoY; GAAP net income was stable at $5.7M despite store closures, and interest expense fell to $4.4M on lower average debt .
  • Inventory reduced by ~$11M in Q2 (second consecutive quarter of reductions), working capital metrics improved (AP-to-inventory 186% vs 177% FY2025), and operating cash flow was $30M in 1H FY2026 .

What Went Wrong

  • Revenue declined 4.1% YoY to $288.9M due to the closure of 145 underperforming stores, and missed consensus expectations (Values retrieved from S&P Global)* .
  • Consumer demand softness emerged late in the quarter with September comps down 2% and preliminary October comps down 2% .
  • Labor cost pressure persisted (technician wage inflation added ~80bps to costs), and batteries (-21%) and alignments (-5%) comps weighed on category performance .

Financial Results

MetricQ2 2025Q1 2026Q2 2026Consensus (Q2 2026)
Revenue ($USD Millions)301.4 301.0 288.9 300.6*
Diluted EPS (GAAP) ($USD)0.18 (0.28) 0.18 0.18*
Adjusted Diluted EPS ($USD)0.17 0.22 0.21 —
Gross Margin %35.3% (calc from 106,377/301,391) 35.5% (calc from 106,906/301,035) 35.7% —
Operating Income %4.4% (2.0%) 4.4% —
Comparable Store Sales %(5.8%) 5.7% 1.1% —

Estimates disclaimer: Values retrieved from S&P Global.*

Segment/category performance (comparable-store sales):

CategoryQ2 2025Q1 2026Q2 2026
Front end/Shocks—+26% +18%
Brakes—+9% +6%
Tires—+4% Flat
Maintenance—+4% Flat
Alignments—Flat (5%)
Batteries—+9% (21%)

KPIs and balance sheet/cash flow:

KPIQ4 2025Q1 2026Q2 2026
Stores (end of period)1,260 1,115 1,116
Inventory ($M)181.5 171.9 160.7
AP / Inventory (%)177% 175% 186%
Net bank debt ($M)~40 ~64 ~50
Cash & Equivalents ($M)20.8 7.8 10.5
Credit facility availability ($M)508.7 398.4 409.9
Operating cash flow ($M)132 (FY2025) Slightly negative in Q1 (timing) 30 (1H FY2026)
Dividend per share ($)0.28 (Q4 paid Mar 11) 0.28 (paid Jun 17) 0.28 (paid Sep 9)

Estimates comparison and surprise:

MetricConsensus (Q2 2026)Actual (Q2 2026)Surprise
Revenue ($USD Millions)300.6*288.9 Miss (~$11.7M)*
EPS (Primary) ($USD)0.18*0.21 (adjusted) Beat (+$0.03)*

Estimates disclaimer: Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Comparable-store salesFY2026Expect YoY growth Expect positive comps Maintained
Gross marginFY2026“Remain pressured” vs prior year “Consistent with FY2025” Raised (less negative)
Sales impact from store optimizationFY2026(~$45M) reduction (~$45M) reduction Maintained
Adjusted diluted EPSFY2026Expect YoY improvement Expect YoY improvement Maintained
CapexFY2026$25–$35M $25–$35M Maintained
DividendFY2026Fund dividend within OCF Fund dividend within OCF Maintained
SG&A run-rate (ex non-operating)2H FY2026Flat YoY run-rate anticipated Above Q2, closer to flat YoY Clarified higher spend vs Q2
Formal FY2026 guidanceFY2026Not providing Not providing Maintained

Earnings Call Themes & Trends

TopicQ4 FY2025 (Prior-2)Q1 FY2026 (Prior-1)Q2 FY2026 (Current)Trend
Digital marketing & CRM activationIdentified high-value customers, plan to reallocate spend Tests across several hundred stores; early results encouraging ~600 stores targeted; scaling by end-Dec; new VP Marketing hired Improving/Scaling
ConfiDrive adoption & selling effectivenessConfiDrive emphasized as core in-store tool Clear positive impact on service categories; process optimization Continued emphasis and data reviews; toolkit for DMs Improving
Tariffs & pricingExpected cost increases; mitigation plan Mitigating tariff impacts; mix and promotions pressured Q1 GM Expect full-year GM consistent with FY2025; balancing cost/price Stabilizing
Tire mix, assortment & vendor supportPlan to simplify core assortment, strengthen partnerships SVP Merchandising hired; vendor meetings Enhanced vendor support; fall promotions; assortment work ongoing Improving
Store closures & real estate dispositionAnnounced 145 closures Closure completion and inventory repositioning Exited 21 leases, sold 3 locations; $5.5M proceeds Executing/De-risking
Working capital & liquidityAP/Inventory improved to 177%; $509M availability $398M availability; AP/Inv 175% AP/Inv 186%; ~$410M availability Improving
Consumer demandWeather-affected Q4; momentum into Q1 Positive comps with value customer trade-down Softness noted; Sept down 2%, prelim Oct down 2% Mixed/Soft
Dividend policyAffirmed dividend capacity Affirmed dividend capacity Affirmed dividend capacity; $0.28 paid in Q2 Maintained

Management Commentary

  • “We achieved this through solid gross margin performance, with a gross margin rate that expanded 40 basis points to 35.7% and prudent operating cost control… reduced inventory… by approximately $11 million” — Peter Fitzsimmons, CEO .
  • “Gross margin increased 40 basis points… primarily from lower occupancy costs and lower material costs… partially offset by higher technician labor costs… due to wage inflation” — CFO Brian D’Ambrosia .
  • “We continue to expect… store optimization plan will reduce total sales by approximately $45 million… expect… gross margin for the full year of fiscal 2026 will be consistent with fiscal 2025… and deliver a year over year improvement in our adjusted diluted EPS” — CFO .
  • “Preliminary October comps… down 2%, we expect to deliver positive comp store sales in fiscal 2026” — CEO .
  • “At the end of the second quarter, we had… availability under our credit facility of approximately $410 million, and cash and equivalents of approximately $10 million” — CFO .

Q&A Highlights

  • Mix of price vs traffic: Traffic down mid-single digits, ticket up mid-single digits, netting +1.1% comp; management sees unevenness but expects benefits from marketing rollout in coming quarters .
  • Gross margin drivers: +70bps occupancy leverage from comps and closures; +50bps material cost improvement (better service margins); offset by +80bps technician wage inflation; full-year GM expected consistent with FY2025 .
  • Tires backdrop: Units declined mid-single digits, but management believes relative outperformance; “tires for everyone” across tiers supports peak season demand .
  • SG&A trajectory: Q2 SG&A $2.8M lower YoY; excluding non-operating items, $4.7M lower; expect higher spend in Q3–Q4 tied to marketing, closer to flat YoY ex non-operating .
  • Dividend safety: Cash flows support dividend and capital priorities; payout ratio viewed vs cash generation rather than net income .

Estimates Context

  • Q2 FY2026 EPS beat: adjusted EPS $0.21 vs consensus $0.18 (5 estimates), a $0.03 beat (Values retrieved from S&P Global)* .
  • Q2 FY2026 revenue miss: $288.9M vs consensus ~$300.6M (5 estimates), an ~$11.7M miss (Values retrieved from S&P Global)* .
  • Implications: Consensus likely to adjust near term to reflect softer late-quarter demand and store closure impact on topline, while margin trajectory and operational levers support EPS resilience. Estimates disclaimer: Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Mixed print with EPS resilience: Despite topline pressure from store closures and late-quarter demand softness, cost control and margin management delivered an adjusted EPS beat; dip-buyers may focus on execution levers and improving gross margin outlook .
  • Category divergence is material: Strength in shocks/brakes and flat tires/maintenance underscores the importance of service attachment and ConfiDrive-driven selling effectiveness; watch batteries/alignments drag .
  • Outlook turning modestly more constructive: Management moved full-year gross margin view from “pressured” to “consistent with FY2025” and reiterated positive comps and EPS improvement expectations, indicating stabilization .
  • Working capital and liquidity strong: AP-to-inventory improved to 186%, cash ~$10M, and ~$410M facility availability; supports dividend and capex .
  • Near-term risk: Preliminary October comps down 2% and macro sensitivity for lower-income consumers challenge momentum; SG&A to run higher vs Q2 as marketing scales .
  • Structural actions de-risk: Real estate exits generating cash, store optimization reduces low-margin sales, and vendor support/assortment updates should aid mix and pricing .
  • Corporate governance catalyst: Rights plan in response to Icahn Enterprises’ ~17% stake may influence stock narrative and strategic optionality near-term .