MONRO, INC. (MNRO)
Monro, Inc. operates 1,260 U.S. retail tire and auto repair stores, servicing 4.2 million vehicles in fiscal 2025. The company reported a 6.4% drop in sales to $1.195 billion, driven by a 5.3% decline in comparable store sales and fewer selling days. Gross margin compressed by 50 bps, and operati...
Monro, Inc. (MNRO) 2025 10-K Review
In this in-depth review, we unpack Monro, Inc. (NASDAQ: MNRO) and its fiscal 2025 10-K filing, covering the business model, financial results, recent developments, risks, and management’s strategic moves. We’ll explore whether Monro’s current profile and performance justify an investment, concluding with a rounded investment score and our outlook.
Warren.AI 💰 4.5 / 10
1. Business Overview
Who is Monro?
Monro, Inc. is a leading U.S. operator of retail tire and automotive repair stores. As of March 29, 2025, Monro operated 1,260 company-owned locations under brands like Monro Auto Service, Tire Choice, Mr. Tire, Car-X, and others. They also have 2 retread facilities and 47 franchised Car-X outlets. Fiscal 2025 saw 4.2 million vehicles serviced.
Core offerings:
- Tire sales & services: Replacement tires, installations, alignments.
- Undercar repairs: Brakes, exhaust, steering & suspension, wheel alignments.
- Routine maintenance: Oil changes, battery sales, and related services.
Business Model: Monro’s scale drives negotiating power with suppliers and distributor ATD (formerly American Tire Distributors) for tire inventories. Most parts and tires are centrally purchased and distributed, with local vendor purchases covering 33% of parts on demand.
2. Strategic Initiatives and Recent Developments
2.1 Performance Improvement Plan
- Executive change: Peter D. Fitzsimmons took over as CEO on March 28, 2025.
- Engagement with AlixPartners: A consulting agreement was signed to assess operations and improve financial performance.
2.2 Store Closure Plan
- Closure of 145 underperforming stores in Q1 FY2026.
- Expected $10–15 million in closing costs.
2.3 Credit Facility Amendments
- Entered into a Fifth Amendment on May 23, 2025, extending covenant relief into Q1 FY2027.
- New covenants temporarily reduce the interest coverage ratio to 1.00× and allow adjusted debt/EBITDAR up to 4.75× (5.00× post-acquisition).
- Facility size permanently reduced to $500 million from $600 million.
3. Financial Results Snapshot (FY2025 vs. FY2024)
| Metric | FY2025 | FY2024 | Change |
|---|---|---|---|
| Sales | $1,195M | $1,277M | –6.4% |
| Comparable Store Sales | (5.3%) | +2.5% | –7.8% |
| Gross Margin | 34.9% | 35.4% | –50 bps |
| Operating Income | $12.6M | $71.4M | –82.4% |
| Net (Loss) Income | $(5.2M) | $37.6M | –$42.8M |
| Adjusted EPS¹ | $0.48 | $1.33 | –64% |
| Cash from Ops | $131.9M | $125.2M | +5.4% |
| Capital Expenditures | $26.4M | $25.5M | +3.5% |
| Net Debt (incl. leases) | $321M | $358M | –10.4% |
¹Adjusted for non-GAAP items: store impairments, back-office optimization, one-time sales and transition costs, and HQ sale gains.
Key drivers:
- A 6.4% decline in sales was chiefly due to negative traffic and fewer selling days.
- Comparable sales were down 5.3% (3.5% adjusted for days).
- Gross margin contraction from mix, promotions, and rising material costs.
- Record store impairment of $24.4 million (up from $1.9 million).
- Net loss of $5.2 million reflects significant non-recurring charges.
4. Liquidity & Capital Structure
- Cash & equivalents: $20.8 million (up from $6.6 million).
- Cash from operations: $131.9 million, improved by working capital management.
- Credit Facility borrowing: $61.3 million drawn, $508.7 million available under amended $500 million facility.
- Debt covenants: amended through Q1 FY2027 with relaxed coverage and leverage ratios.
- Dividends: $1.12/share, totaling $34.9 million.
Monros strong cash generation and banking covenants provide flexibility despite a challenging year.
5. Risk Factors
External Risks
- Economic Sensitivity: Inflation, interest rates, and tariffs can dampen customer spending.
- Miles Driven: A shift to remote work or public transport reduces service frequency.
- Electric Vehicles: Lower maintenance needs threaten core service revenue.
- Supply Chain: Dependence on ATD and tariffs on imported parts may drive up costs.
Operational Risks
- Competition: Dealer service centers, tire specialty chains, online sellers.
- Labor Supply: Technician shortages could raise expenses and limit growth.
- Regulation: Environmental, labor, and data security compliance costs.
- Cybersecurity: Data breaches risk penalties and reputational harm.
Financial Risks
- Leverage & Covenants: Must manage debt ratios to avoid defaults.
- Store Closures: Additional impairment and lease exit costs.
6. Valuation & Investment Outlook
Pros:
- Market leadership in a $50 billion U.S. market.
- Solid cash flow enables dividends and opportunistic M&A.
- Scale supports negotiated pricing and vendor terms.
Cons:
- Declining sales and comp store traffic.
- Thin margins under promotional and inflation pressure.
- Store impairment and closure costs weigh on near-term performance.
- EV adoption and economic headwinds threaten service demand.
Investment Score: 4.5 / 10
Monro is a well-run, cash-generative auto service operator with strategic scale and brand recognition. However, a notable downturn in comparable sales, a net loss, aggressive store closures, and evolving market risks (EVs, economic slowdown) lead us to a cautious rating. Investors seeking stable, defensive consumer service names might look elsewhere until Monros turnaround initiatives gain traction.
¹Appendix: For non-GAAP reconciliations and a deep dive into segment disclosures, see our full analysis.