Name: MONRO, INC. Q3 2025 Earnings Call
Start: 2025-01-29T13:31:00.000Z

Executive Summary

Q3 2025: Sales $305.8M (-3.7% y/y), diluted EPS $0.15 (adjusted EPS $0.19); comps -0.8% adjusted for one fewer selling day, improving 500 bps sequentially from Q2’s -5.8%; December comps turned positive (+1%), led by tire units growth .
Gross margin compressed 120 bps y/y to ~34.3% on tire mix trade-down to Tier 3 and increased self-funded promotions; labor efficiencies partially offset pressure; operating margin fell to ~3.3% (vs ~6.7% y/y) .
Management maintained focus on unit/customer growth even at near-term margin cost; reiterated FY25 operating cash flow “at least $120M;” narrowed capex plan to $25–$30M (from $25–$35M prior), dividend $0.28 paid in December .
Near-term catalysts: service category recovery (brakes turned positive in January), continued execution of ConfiDrive and oil-change offers, and winter weather potentially boosting demand, though tire mix/promotions likely keep material margins pressured in Q4 .

What Went Well and What Went Wrong

What Went Well

Returned to year-over-year comp growth in December; tire units up low single digits in Q3 with mid-single-digit growth in December; ~300 smaller stores outperformed overall comps by ~250 bps .
ConfiDrive digital inspection and oil-change offer lifted service category attachment; batteries (+30%), alignments (+13%), front-end/shocks (+6%) comps y/y in Q3 .
Strong liquidity and cash generation: $103M operating cash flow YTD; total liquidity $521M; net bank debt ~$49M and net bank debt/EBITDA 0.4x .

What Went Wrong

Gross margin down 120 bps y/y on tire mix shift to Tier 3 and higher self-funded promotions; operating margin compressed to ~3.3% (vs ~6.7% y/y) .
Overall comps still negative (-0.8% adjusted; -1.9% unadjusted); brakes comps -6% y/y in Q3; SG&A leverage worsened (31.0% of sales vs 28.7% y/y) due to front shop labor investments and store support costs .
January prelim comps down ~1% (adjusted) from extreme weather impacting tire sales and traffic, despite service strength (including brakes) .

Financial Results

Metric	Q3 2024	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD Millions)	$317.7	$293.2	$301.4	$305.8
Diluted EPS ($)	$0.38	$0.19	$0.18	$0.15
Adjusted Diluted EPS ($)	$0.39	$0.22	$0.17	$0.19
Gross Profit ($USD Millions)	$112.7	$109.2	$106.4	$104.8
Gross Margin (%)	35.5%	37.3%	35.3%	34.3%
Operating Income ($USD Millions)	$21.4	$13.2	$13.2	$10.0
Operating Margin (%)	6.7%	4.5%	4.4%	3.3%
Net Income ($USD Millions)	$12.2	$5.9	$5.6	$4.6
Net Income Margin (%)	3.8%	2.0%	1.9%	1.5%
Comparable Store Sales (y/y, adjusted)	-6.1%	-9.9%	-5.8%	-0.8%

Note: Margins computed from reported figures; citations reference source data.

Segment/category comps (y/y):

Category	Q2 2025 y/y Comp	Q3 2025 y/y Comp
Tires	-4%	-1%
Batteries	+20%	+30%
Alignments	Flat	+13%
Front end/shocks	-5%	+6%
Maintenance services	-7%	-2%
Brakes	-12%	-6%

Key KPIs and balance sheet/cash:

KPI	Q1 YTD FY25	Q2 YTD FY25	Q3 YTD FY25
Cash from Operations ($USD Millions)	$26	$88	$103
Total Liquidity ($USD Millions)	$477 (as of 6/29/24)	$529 (as of 9/28/24)	$521 (as of 12/28/24)
Net Bank Debt ($USD Millions)	$93	$41	$49
Net Bank Debt / EBITDA (x)	0.7x	0.3x	0.4x
AP-to-Inventory Ratio (%)	172%	185%	179%
Capex ($USD Millions)	$9	$14	$21
Financing Lease Principal Payments ($USD Millions)	$10	$20	$30
Dividend per Share ($)	$0.28 (paid Jun 18, 2024)	$0.28 (paid Sep 10, 2024)	$0.28 (paid Dec 17, 2024)
Stores (end of period)	1,284	1,272	1,263

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Operating Cash Flow	FY 2025	At least $120M	At least $120M	Maintained
Capital Expenditures	FY 2025	$25–$35M	$25–$30M	Lowered (upper bound ↓ $5M)
Gross Margin vs FY 2024	FY 2025	Expansion vs FY24	Perspective provided on call; near-term pressure persists (mix/promotions); long-term target restore to pre-COVID	Maintained directional
Fixed Occupancy Costs	FY 2025	~Flat on $ basis vs FY24	Reiterated leverage with top-line improvement; focus on productivity	Maintained directional
Formal Revenue/EPS Guidance	FY 2025	Not provided	Not providing; will give perspective on call	Maintained (no formal guidance)
Dividend	FY 2025	Quarterly $0.28 declared/paid	$0.28 paid Dec 17, 2024	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025)	Previous Mentions (Q2 2025)	Current Period (Q3 2025)	Trend
Consumer trade-down, tire mix	Preserved tire margins via manufacturer-funded promos; units returned to growth in June	Shift from Tier 1/2 to Tier 3; material margin pressure; rebates timing headwind	Tier 3 now ~high-20s to ~30% mix; continued pressure; self-funded promos increased	Persistent mix pressure
ConfiDrive digital inspection	Initiatives beginning to drive attachment and service improvement	Continued traction; attachment improving (alignments)	Improving service category comps; front shop labor investment to support process	Improving execution
Oil change offer/promotions	Managed discounting to drive traffic	Focus to improve traffic and units	Value-oriented oil offers central to Q4 objectives	Ongoing lever
Service categories (brakes, batteries)	Batteries strengthened; brakes underperforming	Brakes -12% y/y; batteries +20%	Batteries +30%; brakes -6% in Q3 but turned positive in January	Recovery (early signs)
Occupancy/labor productivity	240 bps labor tailwind; occupancy deleverage	130 bps labor tailwind; 60 bps occupancy deleverage	Labor optimization continues; SG&A up from front shop labor; aim to leverage with top-line	Mixed: leveraging with growth
Weather	N/A	Hurricanes impacted October prelim	Q3 weather neutral; January extreme weather hurt tires but likely benefits coming months	Potential tailwind
ATD relationship/earn-out	N/A	Business as usual; $6.8M earn-out receivable	$6.8M receivable remains; no reserve; ops normal during restructuring	Stable
Regional trends	N/A	N/A	South stronger than consolidated; Midwest/Northeast/West weaker	Mixed by region

Management Commentary

“We drove a sequential improvement in our year-over-year comparable store sales percentage change from the second quarter and returned our business to year-over-year comparable store sales growth in the month of December… Our ConfiDrive digital courtesy inspection process and our oil change offer allowed us to drive sequential improvement… We drove year-over-year growth in both units and sales dollars for batteries, alignments and front/end shocks.” — Mike Broderick, CEO .
“Gross margin decreased 120 basis points compared to the prior year… higher material cost due to mix within tires and increased self-funded promotions… partially offset by lower technician labor costs.” — Brian D’Ambrosia, CFO .
“We remain committed to sales and unit growth and improving our customer counts, and we are willing to make the necessary price and promotional investments even if it puts pressure on our profitability in the near term.” — Mike Broderick .
“At the end of the third quarter, we had net bank debt of $49 million, a net bank debt-to-EBITDA ratio of 0.4x and total liquidity of $521 million.” — Brian D’Ambrosia .

Q&A Highlights

Gross margin outlook: Continued pressure expected near term from consumer trade-down and elevated promotional activity; labor productivity gains persist but diminish versus prior-year comps; path to pre-COVID margins requires easing material cost pressure, improved mix, and top-line leverage .
Weather impact: Q3 neutral; January extreme weather depressed tire sales/traffic but viewed as a positive setup for coming months; service categories remained strong (including brakes) .
ConfiDrive benefits: Better attachment rates driving higher average ticket; batteries/alignment/ride control performing well; brakes improved into January .
Tire tier mix: Tier 3 mix now ~30%; promotions aim to steer customers away from Tier 4 while maintaining value; manufacturer-funded promotions continue .
SG&A guardrails: Front shop labor investment to support ConfiDrive expected to continue; productivity improvements elsewhere to offset where possible .

Estimates Context

Wall Street consensus estimates via S&P Global (EPS, revenue) were unavailable at the time of this analysis due to SPGI request limits; as a result, we cannot quantify beat/miss versus Street for Q3 2025 at this time [SPGI error].
Given comps and margin commentary, near-term estimate revisions may bias lower on gross margin and operating margin, with potential upward adjustments to service-category revenues if January strength persists .

Key Takeaways for Investors

Sequential comp improvement and December positive comps indicate traction in initiatives; Q4 focus on oil-change offer, ConfiDrive, and service categories should support traffic and units, albeit with continued margin trade-offs .
Material margin headwinds from tire mix/promotions likely persist into Q4; recovery to pre-COVID gross margins hinges on easing trade-down dynamics and better service mix; monitor braking category and attachment trends .
Strong liquidity and low net bank leverage provide flexibility to fund promotions, labor investments, and dividend while pursuing working capital improvements (AP/inventory ratio) .
Capex guidance narrowed to $25–$30M (from $25–$35M), reflecting disciplined spend amidst margin pressure; watch for productivity ROI from front shop labor and digital inspection scaling .
Weather could be a near-term catalyst (service demand in winter), but tire sales are sensitive to traffic; regional dispersion (South stronger) suggests geographic exposure matters for weekly trends .
ATD restructuring risk appears contained; $6.8M earn-out receivable expected to be collected; supply operations remain normal, reducing distribution uncertainty .
Without formal revenue/EPS guidance, the narrative is “self-help”: unit growth, attachment, and working capital gains against a value-oriented consumer; trading stance should consider margin-volatility near term versus potential multi-quarter top-line recovery .

MONRO, INC. (MNRO)·Q3 2025 Earnings Summary