Monro, Inc. · NASDAQ:MNRO
Monro — Investor Day (May 2018)
70 slides from Monro's investor day presentation, May 22, 2018
Slide 1: Monro, Inc. Investor Day May 21, 2018
Monro, Inc. Investor Day May 21, 2018 Exhibit 99.2
Slide 2: Safe Harbor Statement and Non-GAAP Measures
Certain statements in this presentation, other than statements of historical fact, including estimates, projections, statements related to our business plans and operating results are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Monro has ide
Slide 3: Today's Presenters
Today’s Presenters Brett Ponton President and Chief Executive Officer Deep auto industry and turnaround experience While serving as CEO and President of American Driveline Systems (AAMCO), was instrumental in the turnaround efforts at the Company and led the successful sale to a private equity buyer
Slide 4: Today's Presenters
Today’s Presenters Evan Naylor Chief Operating Officer Broad experience driving operational excellence at various national retailers Developed and implemented enterprise-wide strategies at the corporate and field level, building high performing teams and driving P&L growth Previous experience includ
Slide 5: Brett Ponton President & Chief Executive Officer
Brett Ponton President & Chief Executive Officer
Slide 6: Agenda
Agenda Presentations Company Overview Industry Trends Strategy Overview Financial Outlook Questions & Answers
Slide 7: Company Overview
Company Overview Dominant in the Northeastern U.S. and expanding in Southern and Western adjacent markets Fiscal 2018 sales of $1,127.8 million 1,166 company operated stores in 27 states and 98 franchised locations as of May 21, 2018 29 acquisitions in the past 6 fiscal years, adding 386 locations,
Slide 8: A Strong Brand Portfolio
A Strong Brand Portfolio 10 well-known regional brands underneath Monro’s corporate umbrella Operating two store formats in key markets Service stores – 547 stores 80% maintenance services, 20% tires $600,000 a year in sales per store Tire stores - 619 stores (excluding wholesale) 60% tires, 40% ser
Slide 9: A Unique Operating Model
A Unique Operating Model Monro Has a Diversified Supply Chain, Sourcing High Quality, Low Cost Parts Direct and a Strong Portfolio of Tire Brands TIRES PARTS Secondary parts distribution: The following types of parts are sourced from various cities in China: Brake Rotors and Pads Filters Steering an
Slide 10: A Favorable Industry Backdrop
A Favorable Industry Backdrop Favorable Industry Backdrop for Automotive Services with the Vehicles in Operation Expected to Grow Significantly Over the Next Five Years U.S. Annual Light Vehicle Sales (in Millions) Total Miles Traveled in U.S. Source: FRED Economic data, Light weight Vehicle Sales:
Slide 11: A Favorable Industry Backdrop: Vehicles in Operation
A Favorable Industry Backdrop Vehicles in Operation – 0 to 5 Years Vehicles in Operation – 6 to 12 Years Monro is Well-Positioned to Capitalize on Positive Industry Trends, with Our Sweet Spot Experiencing the Fastest Growth in Vehicles in Operation Strong growth in new vehicles (0-5 years) over the
Slide 12: A Favorable Industry Backdrop: $230 Billion DIFM Segment
A Favorable Industry Backdrop Monro Operates in the $230 Billion Do-It-For-Me* Segment of $287 Billion U.S. Automotive Aftermarket Industry Automotive Aftermarket DIFM vs. DIY Sales (in Millions) Source: Autocare Association Factbook 2008 % (outlets) 2016 % (outlets) CAGR Dealers 20,770 15.6% 16,680
Slide 13: Auto Service Industry Dynamics and Monro's Sweet Spot
VEHICLE AGE 0-2 YEARS 3-5 YEARS 6-12 YEARS 13-15 YEARS 15+ YEARS Services Required Warranty Work Placeholder Oil Changes Scheduled Maintenance Tires (and related) Brakes Shocks and Struts Exhaust Transmission Engine Drivers of Consumer Behavior Honor Warranty Quality Price/Value Price/Value Price/Va
Slide 14: Industry Trends and Aftermarket Sweet Spot
Industry Trends and Aftermarket Sweet Spot Vehicles in Monro’s Sweet Spot of 6-12 Years Represent 45% of Vehicles Serviced Monro vs. Industry % of Total Vehicles in Operation % in Cohort Monro vs. Vehicles in Operation Source: Lang, IHS Markit, Monro Analysis, 2018 Yrs
Slide 15: Vehicle Needs Will Evolve with Technology
Tire Replacement and TPMS Systems Wheel Alignment Electric Regenerative Brake Systems Shocks and Struts Steering and Suspension HV Battery Pack Cooling/Heating HV Battery Pack Service Vehicle Needs Will Evolve with Technology Hybrid Vehicles generally require the same level of maintenance and repair
Slide 16: Key Takeaways
Key Takeaways Vehicle Population (VIO) Age Cohort Vehicle Complexity + DIFM Fewer Outlets Market Fragmentation 6-12 year cohort expected to grow the fastest Expected to grow significantly over the next 5 years Significant opportunities for further consolidation Accelerated shift to DIFM from DIY Few
Slide 17: Gaining Momentum: Launch of Foundational Tools
Gaining Momentum: Launch of Foundational Tools Business Intelligence and KPI Dashboards Provides management with greater visibility at all levels Identify strengths/opportunities by key metric Allows management to prioritize time and attention Cloud-based Store Audit Process Standardize store review
Slide 18: Gaining Momentum: Solid 4QFY18 Results
Gaining Momentum: Solid 4QFY18 Results Comparable store sales increased by 2.4% adjusting for an extra week in March FY 2018 Sales from new stores totaled $13.8M, including sales from recent acquisitions of $8.7M Normalized Winter Weather and the Launch of Strategic Initiatives Has Contributed to Mo
Slide 19: Gaining Momentum: Recent Acquisitions
Appalachian Tire Acquisition Completed previously announced Appalachian Tire acquisition in the fourth quarter 7 retail locations in 4 states Filling in the existing markets of Ohio, Kentucky, West Virginia and Virginia $7M in annualized revenue Sales mix of 45% service and 55% tires Free Service Ac
Slide 20: The Monro.Forward Strategy
The Monro.Forward Strategy Improve Customer Experience Optimize Product & Service Offering Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives Accelerate Productivity & Team Engagement Enhance Customer-Centric Engagement Scalable Platform to Drive Sustainable Growth
Slide 21: Driving Long-Term Sustainable Growth
Driving Long-Term Sustainable Growth Enhance Customer-Centric Engagement Customer retention Customer acquisition Omnichannel Accelerate Productivity & Team Engagement Optimized store staffing model Clearly defined career path and enhanced training program Aligned compensation Improve Customer Experi
Slide 22: Improve Customer Experience
Improve Customer Experience Improve SEO and local listing management Effectively build and manage online presence Online Reputation Management Deliver a best-in-class experience to all customers Provide clear product choices and quality service to customers Consistent In-Store Experience Modernize s
Slide 23: Importance of Online Reviews
97% of consumers read online reviews for local businesses in 2017 Reviews are an important ranking factor in local and voice search 85% of people trust online reviews as much as a personal recommendation, leading to customer confidence in conversion Fulfilling our improved customer experience in-sto
Slide 24: Soliciting Customer Feedback to Improve In-Store Execution
Soliciting Customer Feedback to Improve In-Store Execution Leveraging Technology to Solicit Feedback from Customers: Over 50,000 Surveys & Reviews Completed from January through April Seeking experience feedback from all customers Survey assesses customer’s experience across all major “touchpoints”
Slide 25: Improved Online Reputation
Customer satisfaction and online reputation pilot program launched in January Two regions were early adopters representing 185 stores One region in service format One region in tire format Launched program in scale across all stores in late February Results: 5x increase in number of online reviews A
Slide 26: Case Study – Pilot Program Across Stores
Case Study – Pilot Program Across 185 Stores Online Reviews and Ratings average online star rating Pilot Program Launched in January in Two Regions and Two Store Formats Showing Impressive Results Online Search Traffic (SEO) Powered by Comp Sales % Change Customer Actions Taken Online Click on call
Slide 27: In-Store Operational Excellence
In-Store Operational Excellence Delivering a High-Quality and Consistent Experience to Our Customers REVIEW COURTESY INSPECTION 5 FIRST IMPRESSION 1 MEET AND GREET 2 CHECK-IN 3 START INITIAL WORK ON VEHICLE PERFORM INSPECTION 4 CHECK-OUT 8 REVIEW SCHEDULED MAINTENANCE 6 7 ESTIMATE / ADDITIONAL WORK
Slide 28: Store Re-Image Options
Store Re-Image Options Modernized Store Layout Setting Brand Standards for All Retail Stores Across All Markets Brand consistency Consistent promotional strategy Clear merchandising strategy Point of purchase strategy Setting Brand Standards For How We Look 1 2 3 4 5 Refresh Light: Cosmetic upgrades
Slide 29: Modernized Store Layout
Modernized Store Layout Driving Consistency in Our Store Appearance and Store Layout Across Our Markets and Store Formats
Slide 30: Key Takeaways
Key Takeaways Strong momentum as we exit Fiscal 2018 Foundational technologies in place to support strategic initiatives Focus on delivering a consistent best-in-class experience to all customers Pilot program for online reputation management showing impressive results Monro.Forward strategy creates
Slide 31: Deborah Brundage Senior Vice President of Marketing & Merchandising
Deborah Brundage Senior Vice President of Marketing & Merchandising
Slide 32: Driving Long-Term Sustainable Growth
Driving Long-Term Sustainable Growth Improve Customer Experience Online reputation management Consistent in-store experience Consistent store appearance Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives Scalable Platform to Drive Sustainable Growth Enhance Customer
Slide 33: Enhance Customer-Centric Engagement
Focus marketing spend to higher ROI channels Launch direct marketing via new analytic-based CRM platform Enhance private label credit card offering Use analytics to optimize digital efforts Leverage market segmentation and demographic information to facilitate direct marketing to target customers Up
Slide 34: Customer Retention & Acquisition
Customer Retention & Acquisition Focus Our Marketing Mix on Higher ROI Channels Marketing to Retain Customers CRM is our #1 tool to retain current customers Build long-term, 1-to-1 customer relationships Leverage analytics to be more productive with marketing dollars by using data-driven insights to
Slide 35: Customer Retention Efforts: CRM
Customer Retention Efforts: CRM Leveraging Analytics to Shift from “Product Focused” Marketing to 1-to-1 Customer Marketing 1 2 3 Improved In-Store Customer Experience Quality, professional service Information/options clearly conveyed Quality of work Better Customer Data and Insights Leverage what w
Slide 36: Customer Retention: Private Label Drive Card
Generate Traffic Leverage unique offers like “free financing for up to 6 months” 120K accounts opened since January 2017 launch, with 60% approval rate Accelerate Conversion Improved in-store conversion via attachment Allows for higher ticket item purchases right when needed Drive Retention Total sa
Slide 37: Drive New Customer Acquisitions With a Digital Focus
Drive New Customer Acquisitions With a Digital Focus Through Search, Social Media Efforts and Customer Targeting Prioritize Search Strategy Improved ratings lead to improved SEO and SEM Online Google SEO/Actions increased as online ratings improved with launch of new in-store experience initiative C
Slide 38: Modernized Website and Omnichannel Presence
Modernized Website Upgrade website to mobile capable architecture Design Better Online Tire Shopping Experience Create more choices for customer with ‘Good, Better, Best’ options Maximize ticket and drive higher conversion Omnichannel Approach Allows customer to view and purchase tires online Levera
Slide 39: Online Tire Retailers Installation Strategy
Online Tire Retailers Installation Strategy Preferred Installer Agreements with Multiple Online Tire Sellers are a Profitable Traffic Driver for Monro Profitable installations with an average ticket of $120, vs. corporate average of $165 50% of these customers are new to Monro Retention in-line with
Slide 40: Key Takeaways
Q2 FY19 Q3 FY19 Q4 FY19 Q2 FY20 Q3 FY20 Q4 FY20 Q4 FY18 FY20 FY19 FY21 Key Takeaways Data-driven “new customer” marketing Monro omnichannel & e-commerce Enhance Customer-Centric Engagement Data-driven CRM New website Increase customer retention by delivering the right message for the right service a
Slide 41: Evan Naylor Chief Operating Officer
Evan Naylor Chief Operating Officer
Slide 42: Driving Long-Term Sustainable Growth
Driving Long-Term Sustainable Growth Improve Customer Experience Online reputation management Consistent in-store experience Consistent store appearance Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives Scalable Platform to Drive Sustainable Growth Enhance Customer
Slide 43: Optimize Product & Service Offering
Improve tire sales strategy to offer the right tires at the right price Leverage data to optimize inventory assortment Simplify invoices and inspection forms Clearly defined ‘Good, Better, Best’ product options Educate customers on new tire installation, brake and oil change service options Optimize
Slide 44: Simplified Customer Inspection Forms
Simplified Customer Inspection Forms New Customer Inspection Forms to Improve Technician Execution and Simplify Communication with Customers New Courtesy Inspection Form Color coding on critical safety systems easy to understand Utilizes M.A.P. reason coding, eliminating jargon Customer leaves with
Slide 45: Clearly Defined Merchandising Strategy with Good, Better, Best Options
Clearly Defined Merchandising Strategy with ‘Good, Better, Best’ Options ‘Good, Better, Best’ Service Packages Provides more options for consumers to choose from Simplifies the customer education and in-store selling process Provides opportunities for trade up and increased attachment New Tire Insta
Slide 46: Improved Tire Sales Strategy
$399.99 $199.99 $129.99 Improved Tire Sales Strategy Tires represent 50% of sales Ensure we are offering the right tires and the right price points is paramount Optimize Tire Mix Through Clearly Defined ‘Good, Better, Best’ Options Use data to develop product screens which align to the consumer demo
Slide 47: Driving Long-Term Sustainable Growth
Driving Long-Term Sustainable Growth Improve Customer Experience Online reputation management Consistent in-store experience Consistent store appearance Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives Scalable Platform to Drive Sustainable Growth Enhance Customer
Slide 48: Accelerate Productivity & Team Engagement
Accelerate Productivity & Team Engagement Align store compensation model with performance Incentives grow as sales, profits and customer experience improve Aligned Compensation Achieve the right balance of labor and technical abilities across our stores Implement data-driven store scheduling softwar
Slide 49: Implement Data-Driven Scheduling
Implement Data-Driven Scheduling Previous staffing was on paper and determined based on a store’s gross sales New cloud-based system to simplify and optimize store scheduling process New model uses key labor drivers to determine staffing complement by store Customer count, sales by category, labor c
Slide 50: Clearly Defined Career Path and Enhanced Training Program
Clearly Defined Career Path and Enhanced Training Program Build Framework to Attract, Develop and Retain Talent Attract the Right Talent Build the best team in the auto aftermarket industry Teammates to see Monro as an opportunity for a career Develop Our Teams Defined career paths for store manager
Slide 51: New Compensation Model Connects Incentives with Performance
New Compensation Model Connects Incentives with Performance Store Compensation Model Aligned with Performance Previous compensation model focused solely on profitability New compensation model is based on broader metrics Same Store Sales Growth (monthly) Profitability Growth (monthly) Customer Exper
Slide 52: Key Takeaways
Q2 FY19 Q3 FY19 Q4 FY19 Q2 FY20 Q3 FY20 Q4 FY20 Q4 FY18 FY20 FY19 FY21 Key Takeaways New store comp plans Monro University (includes career path, LMS) Store staffing & scheduling system Optimize Product & Service Offering Accelerate Productivity & Team Engagement New in-store sales packages Tire cat
Slide 53: Brian D'Ambrosia Senior Vice President of Finance & Chief Financial Officer
Brian D’Ambrosia Senior Vice President of Finance & Chief Financial Officer
Slide 54: Driving Long-Term Sustainable Growth
Driving Long-Term Sustainable Growth Optimize Product & Service Offering Redefined selling approach Optimized tire assortment Improve Customer Experience Online reputation management Consistent in-store experience Consistent store appearance Investments in Technology and Data-Driven Analytics to Sup
Slide 55: Scalable Platform to Drive Sustainable Growth
Scalable Platform to Drive Sustainable Growth Continue to increase store density in our 27 states Expand geographically into attractive markets On average, acquisitions represent the opportunity for 10% annual sales growth Acquisition growth drives scale and operating margin expansion, strengthening
Slide 56: A Proven M&A Strategy
A Proven M&A Strategy Monro’s Acquisition Strategy Has Delivered Significant Growth Over the Years Historical Acquisition Activity Average Acquisition Size FY13 FY14 FY15 FY16 FY17 FY18 Number of locations 139 stores 20 stores 80 stores 35 stores and 134 franchise locations 78 stores, 4 wholesale lo
Slide 57: Data-Driven Go-Forward M&A Strategy
Data-Driven Go-Forward M&A Strategy Top 10 National Chain Market Share Significant Consolidation Opportunity Tire and Auto Service remains a highly fragmented industry Leverage consumer demographic analytics to target and score favorable markets Assist in portfolio management and retail banner decis
Slide 58: Growing Shareholder Value Through Monro.Forward
Growing Shareholder Value Through Monro.Forward Accelerate same store sales growth Drive operating margin expansion Achieve significant earnings growth Three-Year Organic Growth Targets Drive earnings growth through same store sales improvement Focus capital investments on supporting strategic initi
Slide 59: Solid Fourth Quarter Performance and FY18 Results
Solid Fourth Quarter Performance and FY18 Results In-Line with Expectations Solid Full Year Fiscal 2018 Results 4QFY18 4QFY17 Δ FY18 FY17 Δ FY18 Guidance Sales (millions) $285.6 $252.0 13.3% $1,127.8 $1,021.5 10.4% $1,120 - $1,135 Same Store Sales (on a 52-week basis) 2.4% -8.0% 1,040 bps -0.1% -4.3
Slide 60: Fiscal 2019 Outlook
Fiscal 2019 Outlook FY19 FY18 Δ Sales (millions) $1,170 to $1,200 $1,128 3.7% to 6.4% Same Store Sales (on a 52-week basis) +1% to +3% -0.1% 110 bps to 310 bps GAAP EPS $2.30 to $2.40 $1.92 20% to 25% Delivering Growth Today While Investing for Tomorrow Operating Margin Assumes operating margin of 1
Slide 61: Fiscal 2019 Outlook – EPS Bridge
Fiscal 2019 Outlook – EPS Bridge Note: Guidance bridge based on midpoint of FY19 EPS guidance *FY18 adjusted EPS is reconciled to its most directly comparable U.S. GAAP measure (GAAP EPS) on slide 59 *
Slide 62: Fiscal 2019 Outlook – Capital Investment
Fiscal 2019 Outlook – Capital Investment Incremental Capital Spending Focused Primarily on Store Refresh Pilot and Early Rollout Second Half of FY19 Store Refresh Initiative Appropriate level of investment driven by store age, size and market demographics 30 store pilot expected to start in Q3 FY19
Slide 63: Three-Year Organic Growth Financial Targets
Three-Year Organic Growth Financial Targets Accelerating Same Store Sales Growth Drives Operating Leverage and Double Digit Earnings Growth Accelerate from 2% to above 4% Same Store Sales Growth Return to 12%+ Operating Margin Operating Margin Expansion Deliver Consistent 10% - 15% Earnings Growth E
Slide 64: Three-Year Organic Growth Financial Targets
Three-Year Organic Growth Financial Targets Building Momentum through Fiscal Year 2021 SSS Improvement Operating Margin Expansion Expect performance to ramp as we move towards FY 2021, with momentum building as we implement our initiatives Executing on Monro.Forward strategy to drive accelerated sam
Slide 65: Disciplined Capital Allocation
Disciplined Capital Allocation Executing on Growth Strategy While Maintaining a Disciplined Approach to Capital Allocation Investments in the Business ~$75M of incremental capital expenditures over the next 5 years to invest in store re-image and technology Return Cash to Shareholders Thirteen divid
Slide 66: Key Takeaways
Key Takeaways Drive a strong, scalable platform for growth through Monro.Forward Capitalize on fragmented market through disciplined acquisition strategy Maintain disciplined approach to capital allocation Achieve compelling long-term financial targets
Slide 67: Brett Ponton President & Chief Executive Officer
Brett Ponton President & Chief Executive Officer
Slide 68: Monro.Forward Strategic Initiatives
Q2 FY19 Q3 FY19 Q4 FY19 Q2 FY20 Q3 FY20 Q4 FY20 Q4 FY18 FY20 FY19 FY21 Monro.Forward Strategic Initiatives Pilot store refresh & operational excellence New store comp plans Monro University (includes career path, LMS) Technology based in-store experience Data-driven “new customer” marketing Monro om
Slide 69: Final Takeaways
Final Takeaways Leverage strong foundation and favorable industry backdrop Support strategic initiatives through investments in technology Drive operational excellence to increase overall customer lifetime value Capitalize on industry fragmentation and execute acquisition strategy Create scalable pl
Slide 70: Questions & Answers
Questions & Answers