MONRO (MNRO)·Q3 2026 Earnings Summary

Monro Beats EPS by 23% as Turnaround Gains Traction, Stock Slips

January 28, 2026 · by Fintool AI Agent

Monro (NASDAQ: MNRO) delivered its third consecutive earnings beat, reporting adjusted EPS of $0.16 versus the $0.13 consensus estimate—a 23% surprise . Revenue came in at $293.4 million, down 4.0% year-over-year, primarily reflecting the closure of 145 underperforming stores earlier in fiscal 2026 . The stock fell ~1% in regular trading to $20.03 and extended losses to $19.71 (-2.6%) in aftermarket trading.

Did Monro Beat Earnings?

Yes—and this is the third consecutive beat. The automotive service provider topped estimates on profitability despite top-line pressure:

The GAAP EPS of $0.35 includes $13.5 million in net gains from closed store real estate dispositions, which added $0.32 to earnings . Excluding these and other one-time items, adjusted EPS of $0.16 still beat handily.

What Changed This Quarter?

The turnaround story is gaining momentum. Three key developments stood out:

1. Fourth Consecutive Quarter of Positive Comps

Comparable store sales increased 1.2% , marking the fourth straight quarter of positive same-store sales growth and—critically—the first time Monro has delivered positive comps on a 2-year stack in over two years .

2. Gross Margin Expanded 60 bps

Gross margin improved to 34.9%, up 60 basis points year-over-year . The improvement was driven by:

• 80 bps benefit from lower material costs (better price/mix in service and tire categories)
• 30 bps benefit from lower occupancy costs as a percentage of sales
• Partially offset by 50 bps headwind from technician labor costs (wage inflation)

3. Inventory Down $28M Since March

For the third consecutive quarter, Monro reduced inventory levels—this time by over $7 million . Total inventory reduction since March: $28 million (16%), demonstrating improved working capital management.

4. Store Disposition Proceeds Accelerating

The company has aggressively monetized closed store real estate:

• Q3 FY26: Exited 32 leases and sold 20 owned locations, generating $17.3M in proceeds
• YTD FY26: 57 leases exited, 25 locations sold, $22.8M cumulative proceeds

How Did Product Categories Perform?

Performance was mixed across categories :

Service categories represented approximately 49% of sales, down slightly from 50% in the prior year period . The weakness in batteries and alignments reflects broader category trends and weather-related demand shifts.

What Did Management Guide?

Monro is not providing formal fiscal 2026 guidance, but offered qualitative expectations during the earnings call :

Key qualitative points:

• Tariff management: Continuing to carefully manage tariff-related cost increases through pricing adjustments
• Marketing reinvestment: SG&A savings from closed stores being reinvested into marketing to drive traffic
• Dividend maintained: Q3 dividend of $0.28/share paid in December

How Strong Is the Balance Sheet?

Monro's financial position remains solid despite the restructuring costs:

The company generated sufficient cash flow to fund CapEx ($22M YTD), lease obligations ($28M YTD), and dividends (~$26M YTD) .

How Did the Stock React?

The market reaction was muted despite the EPS beat:

The stock has recovered sharply from its July 2025 low of ~$12.22 following the store closure announcement, more than doubling off the bottom. The muted reaction today suggests the turnaround progress was largely priced in.

Historical Earnings Performance

Note the pattern: Monro has now beat estimates three consecutive quarters following four straight misses, reflecting the impact of the operational improvement plan and AlixPartners consulting engagement .

Key Initiatives Update

The company provided updates on its four strategic pillars :

Marketing & Customer Acquisition

• Expanded multi-channel digital marketing to 340+ additional stores
• Added call center support to 114 locations (830+ stores now covered)
• Implemented measurement framework for marketing ROI
• CEO noted: "Every time we've [expanded marketing], the stores that get additional support perform better than they did before and the rest of the network on calls, comp store sales, and gross margin dollars"

Merchandising

• Focused on tire inventory availability for fall/winter season
• Refining assortment strategy to narrow tire SKU count
• Actively managing tariff exposure through vendor negotiations

Customer Experience

• Expanding ConfiDrive inspection tool usage—"in January alone, we drove some incremental service revenue, which is all the result of the inspection tool"
• Deployed District Manager Toolkit and labor optimization tools
• Added field compliance support specialists

Real Estate

• Store disposition process expected to be "largely completed" in coming quarters
• Proceeds enabling focus on improving continuing locations

Q&A Highlights

Key insights from the analyst Q&A session:

Traffic vs. Ticket Dynamics

Management disclosed that traffic was down mid-single digits in Q3, fully offset by a mid-single digit increase in average repair order (ticket), netting to the +1.2% comp . This suggests the turnaround is being driven by higher spend per visit rather than increased foot traffic—a dynamic worth monitoring as marketing spend ramps.

Regional Performance

Performance varied by geography :

• Northeast: Strength (benefiting from early winter weather)
• Mid-Atlantic & South: Consistent
• West: Weakness

Monthly Comp Cadence

The quarter showed volatility by month :

Winter Storm & Tax Refund Tailwinds

CEO Peter Fitzsimmons highlighted two near-term catalysts :

1. Winter Storm Finn: "Over the next couple of weeks, we're gonna see some nice, incremental sales resulting from people recognizing that they really need to do something to keep their vehicles safe."

2. Tax Refunds: "Higher expected consumer tax refunds should provide a tailwind to top-line trends for the remainder of fiscal 2026."

Long-Term Outlook

On the turnaround trajectory, Fitzsimmons noted :

"The impact of marketing and the store improvement efforts takes quarters to really, fully reveal itself... Our expectation is that as the quarters pass, fourth quarter, first quarter next year, and so on, we'll see a lift in comp store sales, and we'll see solid gross margin."

Remaining Store Dispositions

Of the original 145 closed stores, approximately 15 locations remain to be disposed, with owned stores carried at ~$5 million on the balance sheet—representing the minimum expected proceeds .

Key Risks and Concerns

1. Tariff Exposure: The company continues to navigate tariff-related cost increases on imported auto parts and tires

2. Traffic Declines: While comps are positive, underlying traffic remains down mid-single digits —the company is relying on ticket growth to offset

3. Service Category Weakness: Alignments (-13%) and batteries (-16%) remain challenged

4. Consulting Costs: $4.7 million spent on AlixPartners in Q3 FY26 alone

5. Western Region: Underperformance in the West suggests uneven execution across the network

The Bottom Line

Monro delivered another earnings beat as its turnaround gains traction. The closure of 145 underperforming stores is enabling margin improvement and cash generation, while the remaining store base is posting its best comparable sales performance in years. However, the muted stock reaction suggests investors want to see sustained execution before rewarding the shares further. Key catalysts to watch: tariff impacts on pricing, whether positive comps can continue through a soft consumer environment, and completion of the real estate disposition program.

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