MNRO Q2 Deep Dive: Store Closures and Margin Pressures Dominate Management’s Focus

August 12, 2025 at 00:51 AM EDT

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Auto services provider Monro (NASDAQ: MNRO) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 2.7% year on year to $301 million. Its non-GAAP profit of $0.22 per share was 48.6% above analysts’ consensus estimates.

Is now the time to buy MNRO? Find out in our full research report (it’s free).

Monro (MNRO) Q2 CY2025 Highlights:

Revenue: $301 million vs analyst estimates of $296.1 million (2.7% year-on-year growth, 1.7% beat)
Adjusted EPS: $0.22 vs analyst estimates of $0.15 (48.6% beat)
Adjusted EBITDA: $29.76 million vs analyst estimates of $26.71 million (9.9% margin, 11.4% beat)
Operating Margin: -2%, down from 4.5% in the same quarter last year
Locations: 1,115 at quarter end, down from 1,284 in the same quarter last year
Same-Store Sales rose 5.7% year on year (-9.9% in the same quarter last year)
Market Capitalization: $458.7 million

StockStory’s Take

Monro’s second quarter results received a negative market reaction, as investors digested management’s explanation for margin pressures and continued structural changes. The company attributed core performance to the successful closure of 145 underperforming stores, ongoing efforts to optimize merchandising, and targeted customer acquisition strategies. CEO Peter Fitzsimmons noted, “The closure of these stores will have limited impact on our total sales, but is expected to deliver meaningful improvement to our profitability.” Despite steady same-store sales growth and cost control in continuing operations, higher technician labor costs and material inflation weighed on gross margins, leading management to acknowledge a cautious outlook for near-term profitability.

Looking forward, Monro’s guidance is shaped by ongoing operational improvement initiatives and uncertainties around tariffs and cost inflation. Management emphasized the anticipated benefits from recently closed stores and continued digital customer engagement, while cautioning that gross margin will likely remain under pressure. CFO Brian D’Ambrosia stated, “We continue to expect that our gross margin for the full year... will continue to remain pressured.” The company is prioritizing targeted marketing, leveraging the ConfiDrive digital inspection tool, and maximizing cash flow from real estate divestitures, but remains cautious about the timing and magnitude of margin recovery.

Key Insights from Management’s Remarks

Management highlighted four main areas shaping performance this quarter: store closures, merchandising improvements, customer targeting, and operational efficiency.

Unprofitable store closures: Monro completed the shutdown of 145 underperforming stores, removing low-margin operations and initiating efforts to sell related real estate. Management expects this to improve profitability and generate positive cash flow over the next year.
Leadership addition in merchandising: The appointment of Katy Chang as Senior Vice President of Merchandising marks a shift toward more data-driven assortment and supplier negotiations. Early results show improved product availability and discussions to offset tariff risks.
Tariff mitigation and pricing: The company is actively negotiating with suppliers to limit the impact of both actual and anticipated tariffs. While some material cost increases were passed to customers through minimum advertised pricing, gross margin was still pressured by higher input costs.
Targeted customer acquisition: Monro refined its marketing efforts using digital tools and localized campaigns to attract high-value, repeat customers. Initial tests indicated promising results, but management stressed that the full impact will be realized later in the year.
Digital tools and customer experience: Broader use of the ConfiDrive digital courtesy inspection helped drive growth in high-margin service categories such as shocks, brakes, and batteries. Management believes enhancing digital engagement and pre-visit communication will further improve sales conversion and customer satisfaction.

Drivers of Future Performance

Management expects continued operational improvements and marketing initiatives to drive comparable store sales, but ongoing margin headwinds remain a major theme.

Store optimization benefits: The closure of underperforming stores is expected to contribute to higher profitability by eliminating low-margin sales and reducing operating expenses. Management believes this will allow greater focus on improving the remaining 1,115 locations, with potential for operating leverage as comps improve.
Tariff and cost inflation risks: Ongoing uncertainty around tariffs and baseline cost inflation, especially in technician labor and materials, is expected to keep gross margins pressured through the year. The company plans to offset some of these pressures with price adjustments and operational efficiencies, but acknowledges limited visibility on timing.
Digital marketing and service enhancements: Management is investing in digital marketing and expanding the use of ConfiDrive inspections to drive incremental traffic and higher average repair orders. They anticipate these initiatives will help sustain same-store sales growth, though the financial impact will likely be gradual.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will focus on (1) the realized profitability improvement from store closures and related real estate sales, (2) the effectiveness of new digital marketing and ConfiDrive-enabled service enhancements in driving traffic and higher repair orders, and (3) management’s ability to mitigate ongoing margin pressures from tariffs and labor costs. Progress in these areas will be critical for Monro’s operational turnaround.

Monro currently trades at $15.28, down from $16.33 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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