Monro, Inc.

Morning, everyone. I'm Michael Lasser, the Hardline, Broadline, and Food Retail Analyst from UBS. And welcome to day two of our UBS Global Consumer and Retail Conference. We could not be more excited to have the team from Monroe with us. Monroe has been a longstanding participant in the UBS Consumer Conference, and we are so glad that you are back this year. With us from Monroe is the company's Chief Financial Officer, Brian D. Ambrosia. And you're into his role? Over a year, Felix Fechsler, who runs the investor relations function, and Monroe's made a lot of progress in a transformation effort that it's been executing over the last few years, operates in a very dynamic and interesting area of the economy, the auto care industry, which tends to be pretty needs-based, and at this time when the economy is uncertain, it's It's good to have a need-based offering for consumers. So with that being said, and if you could give the group a sense of who the customer is for Monroe, and what have you seen, what have your observations been about that consumer?

Yeah, absolutely. We really appreciate you having us back again, Michael, and good morning, everybody. When we look at our customer, our customer... cuts across some different demographics but they have one thing in common is they're driving a typically our sweet spot a six to twelve year old vehicle and we'll see vehicles certainly newer than that and we see our fair share of vehicles older than 12 years especially as the car parks been aging but the one thing in common is that they are driving an older vehicle and there's you know different reasons for that it may be a single person household driving you know making $50,000 or less driving it for obvious economic reasons and affordability issues of new vehicles as they look at their overall spend across their their categories and it's the same thing for households hundred thousand dollars or lower that are that are doing that as well we'll also see some more affluent households that have maybe two or three Pre-vehicle, the third vehicle may be for a daughter or son, and those create that third vehicle that's aged. And they're likely the customer of both the dealer for their newer vehicles and of the aftermarket. So it's really based on the vehicle. And that's based on rational economic behavior, where as the vehicle depreciates, you start to look at the cost of servicing that vehicle look to really kind of shop for value and the aftermarket provides that value against the depreciation depreciating asset for the for the consumer so I would say as we look at the behavior of that consumer recently in this economic environment across those income thresholds we have seen a shop for value we've seen a good example of that being trade down within tires and it's not just you know the lower end of the tire tier three down to opening price point it's our tier one tires looking for manufacturer rebates looking for offers looking even to trade down and see what value they can get maybe from the next the next brands that are down on the price tier we've also seen some deferral on the service side and that's because trade down opportunities are fewer in service you either do the work or you don't you don't necessarily have as much ability to trade down on the price point and so we've seen deferral open up on the service side but to your point earlier Michael the the auto aftermarket particularly the service and tire business that Monroe operates in which is about 50% tires and 50% service for us service being under hood under car repair those are non-discretionary there's no such thing as a mile that doesn't include wear and tear on a vehicle so we're seeing the consumer continue to drive We're seeing the cars continue to age. That means the work needs to be done. On tires, it's being done at value price points. On service, it's being elongated but cannot be put off forever. But we're certainly seeing those trends more pronounced in the lower income levels.

That's very helpful. And I have some good news. My 15-year-old daughter, Sydney Lasser, got her learner's permit on Monday. So you may have a future consumer in the not-too-distant future. We'll be looking forward to that. For sure. Now, it's been quite a few days with the events of what's happening in the banking system. Give the crowd a sense for how you see any impact of some disruption in the capital markets or the banking system and your customer or the auto aftermarket in general.