Monro, Inc.

Good morning, ladies and gentlemen, and welcome to Munro Incorporated's earnings conference call for the second quarter of fiscal 2024. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the call, please dial star zero on your touchtone phone. And as a reminder, this conference call is being recorded and may not be reproduced in whole or in part without permission from the company. I would now like to introduce Felix Bexler, Senior Director of Investor Relations at Munro, Please go ahead.

Thank you. Hello, everyone, and thank you for joining us on this morning's call. Before we get started, please note that as part of this call, we will be referencing a presentation that is available on the investor section of our website at corporate.monroe.com forward slash investors. If I could draw your attention to the Safe Harbor statement on slide two, I'd like to remind participants that our presentation includes some forward-looking statements about Monroe's future performance. Actual results may differ materially from those suggested by our comments today. The most significant factors that could affect future results are outlined in Monroe's filings with the SEC and in our earnings release. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, on today's call, management statements include a discussion of certain non-GAAP financial measures, which are intended to supplement and not be substitutes for comparable GAAP measures. Reconciliations of such supplemental information to the comparable GAAP measures will be included as part of today's presentation and in our earnings release. With that, I'd like to turn the call over to Monroe's President and Chief Executive Officer, Michael Broderick.

Thank you, Felix, and good morning, everyone. I'd like to spend the first part of our call this morning walking through our second quarter performance, which reflected top line results that were challenged. This was due to consumers deferring tire purchases as persistent inflationary pressures impacted purchases of higher ticket items across the retail spectrum. This was clearly evidenced by an industry-wide slowdown in tire unit sales in the regions of the country where a vast majority of our store footprint is concentrated. We mitigated this slowdown with actions to reduce non-productive labor costs, including overtime hours in our stores. Despite a tough macroeconomic environment, the resiliency of our business model allowed us to expand gross margin and maintain our year-over-year profitability, even on a lower tire sales volume. I'll also discuss our plans to deliver improved earnings this fiscal year, despite some of the consumer-related headwinds that we and others in our industry are experiencing. Before I get into the specifics, I'd be remiss if I didn't take a moment to recognize and thank all of our teammates for their continued dedication to Monroe, serving the needs of our customers as well as their positive contributions to the communities where we operate. Now turning to our second quarter results. Our second quarter comparable store sales declined approximately 2%. Comp store sales were down approximately 1% in our 300 small or underperforming stores and down approximately 2% in our remaining store locations. As I stated earlier, our sales results in the quarter were challenged by consumer deferrals of tire purchases as evidenced by industry-wide slowdown in tire unit sales in the regions of the country where a vast majority of our store footprint is concentrated. This led to pressured store traffic. which was not supportive to sales of our higher margin service categories in the quarter. While our tire units were down approximately 10%, leveraging the strength of our manufacturer-funded promotions allowed us to optimize our assortment for improved tire profitability in the quarter. And while continued consumer trade-down dynamics led to a higher proportion of lower margin opening price point tires within overall industry unit sales, We remain focused on maintaining a healthy mix of opening price point tires in the quarter. Encouragingly, based on the retail sellout data from TORCADA, a subsidiary of ATD, we maintained our tire market share in our higher margin tiers. We mitigated this industry-wide slowdown in tires with actions to reduce non-productive labor costs, including overtime hours in our stores. which were down 26% year-over-year and 14% sequentially. This allowed us to expand gross margin and maintain our year-over-year profitability even on lower tire sales volumes. We will continue to closely manage our labor costs and expenses to maximize profitability. Now, concluding with our plans to deliver improved earnings this fiscal year despite a choppy consumer environment. While our preliminary comp store sales for fiscal October are down approximately 5%, our stores are properly staffed and ready for the back half of the year. And while we will need to see an improvement in the overall health of the consumer before we can fully capitalize on longer term industry tailwinds, we have successfully repositioned our cost structure to deliver improved profitability even on lower comp store sales. We will remain relentlessly focused on achieving comp store sales growth through accelerating growth in our 300 small or underperforming stores, maintaining a balanced approach between our tire and service categories with competitive pricing to drive store traffic, and continuously improving our customer experience. We will also strive to expand our gross margins through properly training our teammates to maximize their productivity. However, given the current pressures on the consumer, we are also laser-focused on maximizing profitability through prudent cost control, which includes rightsizing our fixed costs and rationalizing unproductive labor. While we take these actions, we will not cut productive labor at the sacrifice of our standards and to the detriment of our long-term service model. In addition, we will continue to create cash by optimizing inventory and leveraging the strength of our vendor partners for better availability, quality, and cost of parts and tires in our stores. In closing, despite the challenges posed by the current macroeconomic environment, our business continues to be well positioned, and we are confident that we remain on a path to restore our gross margins back to pre-COVID levels with double-digit operating margins over the longer term. With that, I'll now turn the call over to Brian, who will provide an overview of Monroe's second quarter performance, strong financial position, and additional color regarding fiscal 2024. Brian?