Monro, Inc.

Good morning, ladies and gentlemen, and welcome to Monroe Inc's earnings conference call for the fourth quarter and full year 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 and zero. 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 Vesca, Vice President 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 six fewer selling days in the current year quarter due to an extra week of sales in fiscal 2024 and 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, Peter Fitzsimmons.

Thank you, Felix. And thanks to everyone for joining us this morning. It's terrific to be part of the Monroe team. As many of you already know, my primary objective is to work with the company's management team and board to develop and execute a performance improvement plan that will enhance Monroe's operations, drive profitability, and increase operating income and total shareholder returns. I've successfully led similar improvement plans at other companies and I intend to leverage my extensive background and experience to do the same at Monroe. I've now spent about eight weeks in Rochester at the company and have been fully immersed in our business. I've spent a lot of time with the senior leadership and also engaging with our talented teammates in the field. as well as visiting many stores, both Monroe stores and our competitors. This is all only confirmed the positive view I had about Monroe before I decided to join the company. Let's start with Monroe's strengths. First, this business has shown impressive durability through business cycles. We are positioned as one of the leading players in a highly fragmented industry. Monroe has significant scale that gives us important competitive advantages over smaller players in our industry. And we can leverage this scale in our financial position to make critical investments in our business, our people, and our technology to deliver an outstanding guest experience. Second, certain fundamentals in our industry remain strong. These fundamentals include Continued growth of vehicles on the road, which now exceeds 280 million in the United States. Vehicle miles traveled have returned to pre-COVID levels. And importantly, the average vehicle life of cars on the road today is more than 12 and a half years. Further, an increase in the complexity of vehicles continues to drive a shift from do it yourself to do it for me. with future technology advances expected to accelerate this shift. Third, and finally, our business is a consistent cash generator with ample liquidity, a solid balance sheet, and low leverage. All of this, coupled with our compelling consumer offerings, gives us confidence that we can successfully execute on and accelerate the pace of the company's improvement plan as well as better capitalize on positive industry trends to unlock Monroe's full potential. Now I'd like to share my initial assessment of the business, which highlights four key areas of focus that we've identified as opportunities for improvement and is shown on slide three of our presentation materials. These include closing unprofitable stores, improving our customer experience and selling effectiveness, driving profitable customer acquisition and activation, and increasing merchandising productivity, which includes mitigating tariff risk. Let's start with closing unprofitable stores. In the past few weeks, we conducted a comprehensive store portfolio review that identified 145 underperforming stores to prioritize for closure. Our review included an evaluation of store performance, as well as market segmentation and demographic data specific to the geographic areas of each location. We are now setting into motion a process to close these locations during the first quarter of fiscal 2026. The closure of these stores will have a limited impact on our total sales, but is expected to deliver meaningful improvement in profitability. The 145 stores generated approximately 5% of our total sales in fiscal 2025, and we're likely to recapture some of those sales in locations near the closing stores. Second, improving our customer experience and selling effectiveness. We reviewed stores across our portfolio, from low to high performers, to understand the store experience from both the customer and teammate perspective. Our analysis indicates that customers have had an uneven experience in our stores, largely due to inconsistent teammate execution of core processes, including scheduling and appointments, communication, and quality of service. By breaking down the customer journey, we are developing an approach to address customer pain points that we believe will improve the customer experience and unlock value in our selling effectiveness. The company's Confidrive digital courtesy inspection, which you're all familiar with, will continue to be a key component of our in-store experience. We have many stores that serve our customers very well. Unfortunately, we have others that don't always live up to customer expectations. Addressing this is a high priority item that we will be working hard to improve and with a high sense of urgency. Third, driving profitable customer acquisition and activation. As all of you are aware, Monroe sales have declined sequentially for the past three fiscal years. driven largely by declines in store traffic. Our work indicates that recently there's also been a decline in the quality and retention of new customers. We believe this has been driven by suboptimal marketing, insufficient clarity on who Monroe's target customers are, what these customers value, and how we fulfill their needs. Our analysis also uncovered that Monroe's highest value customers deliver 25 times more profit than our lowest tier of customers. As a result, we are in the process of converting our market testing into a reallocation of marketing dollars aimed at higher value and more profitable customers. The early results from our tests are encouraging. We expect that our approach to improvement in this area will include additional testing of marketing, which will touch such things as messaging, type of media, and promotional offers. We will then scale the tests that deliver the most value across all of our stores. Fourth and finally, increasing merchandising productivity as well as mitigating tariff risk. The company has a broad tire assortment. Our work on the company's current merchandising shows that this broad assortment may not be aligned with what our customer really wants. We expect to narrow the breadth of our core tire assortment, which will simplify the in-store selling process for both our customers and our Monroe teammates. Of course, we will continue to get any tire the customer wants through our many distribution channels, but our core in-store offering will likely be simplified. This will allow us to lean into stronger strategic partnerships with important tire manufacturers. In addition, we are reviewing our pricing and promotions across tires and services to ensure we deliver value to our customers while also achieving appropriate levels of profitability. A word about tariffs. No company today, especially in the automotive sector, can look at the current landscape without considering tariffs. While it is still an obviously uncertain environment, tariffs are expected to drive cost increases across almost all of our major product categories. We have mobilized an internal team for fact-based negotiations with top suppliers to mitigate as much of that anticipated tariff as possible. We expect that we may need to adjust prices to our consumers to counter the impact of tariff-related cost increases. We are currently evaluating the full impact. To conclude, as I reflect on my first eight weeks at Monroe, I think we've conducted a very detailed preliminary assessment of the business, and I believe the opportunities that we've uncovered and plans that we're putting into place will accelerate the pace of the company's performance improvement and unlock Monroe's full potential. We don't expect to see improvement overnight, but I feel pretty confident that we will drive enhanced profitability and increase operating income along with total shareholder returns during fiscal 2026. Before I hand the call over to Brian, I'd like to thank our dedicated teammates for their commitment to our customers. Thanks also to our shareholders and our suppliers for their continued support. And with that, I'll turn the call over to Brian.