Monro, Inc.

Good morning, ladies and gentlemen, and welcome to Monroe Inc's earnings conference call for the third quarter of fiscal 2025. 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 press 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 Wechsler, Senior Director of Investor Relations at Monroe. 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. Lastly, unless otherwise noted, all references to comparable store sales, category sales, and units on today's call will be made on an adjusted for days basis, which adjusts for one fewer selling day in the current year quarter due to a shift in the timing of the Christmas holiday from the fourth quarter in fiscal 2024 to the third quarter in fiscal 2025. 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. This morning, I'd like to share an update with you on our third quarter accomplishments. After that, I'll outline several objectives that we plan to achieve in the fourth quarter. Before I begin, I'd like to recognize and thank all of our teammates for their dedication to Monroe and our customers. Turning to slide three, starting with our accomplishments in the third quarter. We drove a sequential improvement in our year-over-year comp store sales percentage change from the second quarter and returned our business to year-over-year comp store sales growth in the month of December. We believe that our initiatives provide the foundation for continued momentum in our top line performance. Importantly, The year-over-year comp store sales percentage change in both our tire dollar and unit sales improved sequentially from the second quarter, and our tire category sales comp positive in the month of December, with year-over-year growth in units in the quarter. We continue to leverage the strength of our manufacturer-funded promotions, which allowed us to meet the needs of a value-oriented consumer. Now that we've completed the rollout of our Comfort Drive digital courtesy inspection process, we've continued to improve communications and educational selling that has built trust and further solidified relationships with our customers. Comfidrive and our oil change offer, as shown on slide four, allowed us to drive sequential improvement in our year-over-year service category comp store sales percentage change from the second quarter. We drove year-over-year growth in both unit and sales dollars for batteries, alignment, and front-end shocks. And while we drove sequential improvement from the second quarter in our break category, we continue to focus on returning this high margin category to unit and sales growth. Consistent with general industry trade down dynamics, our gross margin in the third quarter continued to be impacted by a value oriented consumer that traded down more of their tire purchases to our tier three offerings. We also increased our level of self-funded promotions to attract value oriented consumers into our stores. And while this pressured material margins in the quarter, we continue to drive labor optimization and efficiencies through productivity improvements, including scheduling training and our attachment selling initiatives. We remain committed to sales and unit growth and improving customer accounts. And we are willing to make the necessary price and promotional investments, even if it puts pressure on our profitability in the near term. Now, onto our objectives for the fourth quarter. Our preliminary fiscal January comp store sales are down 1%, adjusted for one additional selling day in the month. This is driven by weakness in entire category sales that were impacted by extreme weather, which resulted in temporary store closures and lower store traffic, partially offset by strength in our service categories, including breaks. We believe the extreme weather in January will benefit us in the coming months. We expect to leverage our initiatives to achieve our fourth quarter objectives, which include improving store traffic trends driven by our value-oriented oil change offerings, as well as continued growth in tire units, accelerating the performance of our key service categories, utilizing the benefits from Confidrive, and optimizing labor and efficiencies through continued improvements in productivity and maintaining prudent cost control. In summary, our initiatives are driving an improvement in our top-line results. Our comp store sales trends improved sequentially from the second quarter, and we exited the quarter with year-over-year comp store sales growth in the month of December. This was led by our tire category sales, which comp positive in December with year-over-year unit growth in the quarter. While we have more work to do to improve the performance of our high margin break category, we drove a sequential improvement in our year-over-year service category comp store sales percentage change from the second quarter and year-over-year growth in batteries alignment and front-end shocks in the quarter. And although our gross margin took a step back in the quarter, we continue to be focused on sales and unit growth and improving customer counts and are willing to make necessary investments, even if it puts pressure on our profitability in the near term. We are confident we remain on a path to restore our gross margins back to pre-COVID levels with double-digit operating margins over the long return as we return to top-line growth. The traction from our initiatives will enable us to achieve our fourth quarter objectives. And with that, I'll now turn it over to Brian, who will provide an overview of Monroe's third quarter performance, strong financial position, and additional color regarding the remainder of fiscal 2025. Brian? Thank you, Mike, and good morning, everyone.