Monro 2026 Q1 Earnings Misses Targets as Net Income Drops 237.3%

Monro (MNRO) reported its fiscal 2026 Q1 earnings on Jul 30th, 2025. The company experienced a net income decline of 237.3%, posting a net loss of $8.05 million compared to a profit of $5.86 million in the prior year. While sales increased by 2.7% to $301.04 million, Monro reported a diluted loss per share of $0.28, missing expectations. Despite strategic efforts to improve profitability through store closures, Monro’s guidance suggests continued pressure on gross margins. Investors were disappointed by the results, reflecting in a sharp stock price decline post-earnings.

Revenue

Monro's revenue for fiscal 2026 Q1 increased by 2.7% to $301.04 million, compared to $293.18 million in fiscal 2025 Q1. The tire segment emerged as the largest contributor, generating $138.40 million. Maintenance services followed, bringing in $82.93 million. The brakes segment reported revenue of $44.47 million, while steering services contributed $26.74 million. Batteries and exhaust services accounted for $4.21 million and $3.91 million, respectively. Franchise royalties rounded out the total with $389,000 in revenue.

Earnings/Net Income

Monro reported a diluted loss of $0.28 per share in fiscal 2026 Q1, a significant reversal from a profit of $0.19 per share in the prior year, marking a negative change of 247.4%. The company faced a net loss of $8.05 million, contrasting sharply with the previous year's net income of $5.86 million. These results indicate challenging financial performance in the quarter.

Price Action

The stock price of Monro has plummeted 23.88% during the latest trading day, has plummeted 21.50% during the most recent full trading week, and has tumbled 10.91% month-to-date.

Post-Earnings Price Action Review

The strategy of investing in Monro (MNRO) shares following quarters with quarter-over-quarter revenue decreases on financial report release dates has proved unfavorable. Over the past three years, this approach has resulted in a significant underperformance, generating a return of -70.10%, which starkly contrasts with the benchmark return of 87.61%. This translates to an excess return of -157.72%, and the strategy's compound annual growth rate (CAGR) was -21.58%, indicating substantial losses over this period. Despite avoiding further losses during market downturns thanks to a maximum drawdown of 0.00%, the strategy failed to capitalize on any subsequent market recoveries, underscoring its overall poor performance.

CEO Commentary

Peter D. Fitzsimmons, CEO & President, emphasized the progress in key areas identified for performance improvement, including closing unprofitable stores and enhancing merchandising productivity. He noted that the closure of 145 underperforming stores will have limited impact on total sales but is expected to significantly improve profitability. Fitzsimmons highlighted the positive momentum in comparable store sales, achieving mid-single-digit growth in the quarter, and expressed optimism about the company's ability to capitalize on positive industry trends. He acknowledged the challenges posed by inflation and tariffs but remains confident in Monro's durable business model and potential for long-term growth.

Guidance

Monro expects continued year-over-year comparable store sales growth in fiscal 2026, driven by its performance improvement plan, despite anticipating a $45 million reduction in total sales due to store closures. The company projects that gross margins will remain pressured, but adjusted diluted earnings per share are expected to improve year-over-year. Fiscal 2026 capital expenditures are anticipated to range between $25 million and $35 million, while maintaining a strong financial position to fund all capital allocation priorities, including dividends.

Additional News

Monro recently announced the completion of its comprehensive store portfolio review, resulting in the closure of 145 underperforming stores during the first quarter of fiscal 2026. The company distributed a cash dividend of $0.28 per share for the first quarter of fiscal 2026, paid on June 17, 2025. Additionally, Monro released its fifth annual Environmental, Social & Governance (ESG) report, highlighting its commitment to operational excellence and responsible business practices. This report underscores Monro's ongoing efforts to drive growth, strengthen relationships, and deliver long-term value to stakeholders.