Monro, Inc. · NASDAQ:MNRO
Monro — Investor Day (May 2018)
70 slides from Monro's investor day presentation, May 21, 2018
Slide 1: Monro, Inc. Investor Day
Monro, Inc. Investor Day May 21, 2018
Slide 2: Safe Harbor Statement and Non-GAAP Measures
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
Slide 3: Today's Presenters
Today’s Presenters Name Title Relevant Experience ▪ 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 President and Company and led the successful sale to a private equity buyer B
Slide 4: Today's Presenters
Today’s Presenters Name Title Relevant Experience ▪ Broad experience driving operational excellence at various national retailers ▪ Developed and implemented enterprise-wide strategies at the Chief Operating corporate and field level, building high performing teams and Evan Naylor driving P&L growth
Slide 5: Brett Ponton
Brett Ponton President & Chief Executive Officer 5
Slide 6: Agenda
Agenda Presentations Company Overview Industry Trends Strategy Overview Financial Outlook Questions & Answers 6
Slide 7: Company Overview
Company Overview A Leading Chain of Independently Owned and Operated Tire and Auto Service Locations ▪ 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 locat
Slide 8: A Strong Brand Portfolio
A Strong Brand Portfolio Multiple Store Brand Strategy Driving Increased Store Density ▪ 10 well-known regional brands underneath Monro’s corporate umbrella Brand Portfolio ▪ Operating two store formats in key markets − Service stores – 547 stores Service Tire • 80% maintenance services, 20% tires •
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 PARTS The following types of parts are sourced from various cities in China: ▪ Brake Rotors and Pads ▪ Filters ▪ Steering and Suspension ▪ Wipers ▪ Belts
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 U.S. Light Vehicles in Operation (VIO) 18 300 290 16 280 270 14 260 250 12 240 230 10 220 210 8 200
Slide 11: A Favorable Industry Backdrop
A Favorable Industry Backdrop Monro is Well-Positioned to Capitalize on Positive Industry Trends, with Our Sweet Spot Experiencing the Fastest Growth in Vehicles in Operation Vehicles in Operation – 0 to 5 Years Vehicles in Operation – 6 to 12 Years 120 120 110 +6.56% CAGR -.03% CAGR 110 -3.97% CAGR
Slide 12: A Favorable Industry Backdrop
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 2008 % (outlets) 2016 % (outlets) CAGR 300,000 250,000 Dealers 20,770 15.6% 16,680 12.7% (2.7%) 200,000 General Repair
Slide 13: Auto Service Industry Dynamics
Auto Service Industry Dynamics Monro’s Value Proposition is Most Compelling with Consumers Who Own Vehicles Aged 4-15 Years Old with Our Sweet Spot at 6-12 Years VEHICLE AGE 0-2 YEARS 3-5 YEARS 6-12 YEARS 13-15 YEARS 15+ YEARS Services Warranty Work Placeholder Required Oil Changes Scheduled Mainten
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 100% 50% 90% 45% 80% 40% 70% 35% 60% 30% 50% 25% 40% 20% 30% 15% 20% 10% 10% 5% 0
Slide 15: Vehicle Needs Will Evolve with Technology
Vehicle Needs Will Evolve with Technology Monro is Well Positioned to Capitalize on Any Future Shifts in Vehicle Technology ▪ Hybrid Vehicles generally require the same level of maintenance and repair services as traditional Internal Combustion Engines (ICE) ▪ Electric Vehicles (EV) require new type
Slide 16: Key Takeaways
Key Takeaways Positive Industry Trends Vehicle Population (VIO) Expected to grow significantly over the next 5 years Age Cohort 6-12 year cohort expected to grow the fastest Vehicle Complexity + DIFM Accelerated shift to DIFM from DIY Fewer Outlets Fewer players to work on more vehicles in operation
Slide 17: Gaining Momentum: Launch of Foundational Tools
Gaining Momentum: Launch of Foundational Tools Monro Has Made Investments in Technology and Data-Driven Analytics to Support its Strategic Initiatives Business Intelligence and KPI Dashboards ▪ Provides management with greater visibility at all levels ▪ Identify strengths/opportunities by key metric
Slide 18: Gaining Momentum: Solid 4QFY18 Results
Gaining Momentum: Solid 4QFY18 Results Normalized Winter Weather and the Launch of Strategic Initiatives Has Contributed to Momentum in Operating Performance Exiting FY18 Y/Y Comps Trend Improvement 2-Year Stacked Comps Trend Improvement** 4.0% 3.0% 15.0% 2.0% 1.0% 10.0% 0.0% -1.0% Dec-17 Jan-18 Feb
Slide 19: Gaining Momentum: Recent Acquisitions
Gaining Momentum: Recent Acquisitions Monro Continues to Identify and Execute Highly Accretive Bolt-On Acquisitions Consistent with its M&A Strategy Appalachian Tire Acquisition ▪ Completed previously announced Appalachian Tire acquisition in the fourth quarter ▪ 7 retail locations in 4 states ▪ Fil
Slide 20: The Monro.Forward Strategy
The Monro.Forward Strategy Optimize Product & Improve Customer Experience Service Offering Scalable Platform to Drive Sustainable Growth Enhance Customer-Centric Accelerate Productivity Engagement & Team Engagement Investments in Technology and Data-Driven Analytics to Support Strategic Initiatives
Slide 21: Driving Long-Term Sustainable Growth
Driving Long-Term Sustainable Growth Improve Customer Experience Optimize Product & • Online reputation management Service Offering • Consistent in-store experience • Redefined selling approach • Consistent store appearance • Optimized tire assortment Scalable Platform to Enhance Customer-Centric Dr
Slide 22: Improve Customer Experience
Improve Customer Experience Online Reputation Improve SEO and local listing management Management Effectively build and manage online presence Consistent In-Store Deliver a best-in-class experience to all customers Experience Provide clear product choices and quality service to customers Con
Slide 23: Importance of Online Reviews
Importance of Online Reviews Online Star Rating is Our Best “Leading Indicator” for Future Store Traffic Counts 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
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 “touchpoin
Slide 25: Improved Online Reputation
Improved Online Reputation Focus on the In-Store Experience is Having Significant Impact on Company Online Reviews and “Star Ratings” Total Company Online Reviews and Ratings ▪ Customer satisfaction and online reputation pilot 4.1 program launched in January 12,000 4.0 − Two regions were early adopt
Slide 26: Case Study – Pilot Program Across Stores
Case Study – Pilot Program Across 185 Stores Pilot Program Launched in January in Two Regions and Two Store Formats Showing Impressive Results Online Reviews and Ratings Online Search Traffic (SEO) 3,500 4.2 Powered by 4.1 1,000,000 3,000 950,000 2,500 2,000 900,000 3.6 1,500 850,000 3.5 1,000 800,0
Slide 27: In-Store Operational Excellence
In-Store Operational Excellence Delivering a High-Quality and Consistent Experience to Our Customers 1 2 3 Setting Brand Standards For How We Operate ▪ “Remarkable” experience to our customers FIRST IMPRESSION CHECK-IN MEET AND GREET ▪ Information/options conveyed clearly and professionally ▪ Provid
Slide 28: Modernized Store Layout
Modernized Store Layout Setting Brand Standards for All Retail Stores Across All Markets Delivering a Five-Star Experience Setting Brand Standards For How We Look Store Re-Image Options 1 Refresh Light: Cosmetic upgrades only ▪ Brand consistency ▪ Consistent promotional strategy 2 Refresh: “Refresh
Slide 29: Modernized Store Layout
Modernized Store Layout Driving Consistency in Our Store Appearance and Store Layout Across Our Markets and Store Formats 29
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 strate
Slide 31: Deborah Brundage
Deborah Brundage Senior Vice President of Marketing & Merchandising 31
Slide 32: Driving Long-Term Sustainable Growth
Driving Long-Term Sustainable Growth Improve Customer Experience Optimize Product & • Online reputation management Service Offering • Consistent in-store experience • Redefined selling approach • Consistent store appearance • Optimized tire assortment Scalable Platform to Enhance Customer-Centric Dr
Slide 33: Enhance Customer-Centric Engagement
Enhance Customer-Centric Engagement Focus marketing spend to higher ROI channels Customer Retention Launch direct marketing via new analytic-based CRM platform Enhance private label credit card offering Use analytics to optimize digital efforts Customer Acquisition Leverage market segmenta
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 Marketing Mix Focus from FY17 to FY19 ▪ Build long-term, 1-to-1 customer relationships ▪ Leverage analytics to be more productive with market
Slide 35: Customer Retention Efforts: CRM
Customer Retention Efforts: CRM Leveraging Analytics to Shift from “Product Focused” Marketing to 1-to-1 Customer Marketing Right Message for the Right Improved In-Store Customer Better Customer Data and Service at the Right Time 1 Experience 2 Insights 3 Through the Right Channel ▪ Quality, profess
Slide 36: Customer Retention: Private Label Drive Card
Customer Retention: Private Label “Drive Card” Opportunity to Leverage Private Label “Drive Card” to Improve Loyalty and In-Store Conversion FY18 Drive Card Results 250 80 Generate Traffic 70 200 60 ▪ Leverage unique offers like “free financing for up to 6 months” Thousands Millions $ 150 50 ▪ 120K
Slide 37: New Customer Acquisition Strategy
New Customer Acquisition Strategy Drive New Customer Acquisitions With a Digital Focus Through Search, Social Media Efforts and Customer Targeting % Increase in Online Customer Actions in FY18 Prioritize Search Strategy Powered by ▪ Improved ratings lead to improved SEO and SEM 40% 30% ▪ Online Goog
Slide 38: Developing an Omnichannel Presence
Developing an Omnichannel Presence Buy On-Line and Install at Store: Creating a Seamless Buying Experience for Our Customers Modernized Website ▪ Upgrade website to mobile capable architecture Design Better Online Tire Shopping Experience ▪ Create more choices for customer with ‘Good, Better, Best’
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 Integrate with multiple third-party online tire sellers Install Tire Inspect Vehicle Offer Add-On Services Add Customer to CRM System Build Long-Term
Slide 40: Key Takeaways
Key Takeaways ▪ Increase customer retention by delivering the right message for the right service at the right time ▪ Drive new customer acquisition by targeting high value consumers ▪ Invest in marketing channels with the highest return to meet consumers where they are ▪ Create seamless omnichannel
Slide 41: Evan Naylor
Evan Naylor Chief Operating Officer 41
Slide 42: Driving Long-Term Sustainable Growth
Driving Long-Term Sustainable Growth Improve Customer Experience Optimize Product & • Online reputation management Service Offering • Consistent in-store experience • Redefined selling approach • Consistent store appearance • Optimized tire assortment Scalable Platform to Enhance Customer-Centric Dr
Slide 43: Optimize Product & Service Offering
Optimize Product & Service Offering Simplify invoices and inspection forms Redefined Selling Clearly defined ‘Good, Better, Best’ product options Approach Educate customers on new tire installation, brake and oil change service options Improve tire sales strategy to offer the right tires at
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 In-Store Customer Vehicle Courtesy Inspection Forms ▪ Color coding on critical safety systems easy to understand ▪ Utilizes M.A.P.
Slide 45: Focus on Improving In-Store Conversion
Focus on Improving In-Store Conversion 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 tra
Slide 46: Improved Tire Sales Strategy
Improved Tire Sales Strategy Optimize Tire Mix Through Clearly Defined ‘Good, Better, Best’ Options ▪ Tires represent 50% of sales 50% ▪ Ensure we are offering the right tires and the right price points is paramount Use data to develop product screens which align to the consumer demographics around
Slide 47: Driving Long-Term Sustainable Growth
Driving Long-Term Sustainable Growth Improve Customer Experience Optimize Product & • Online reputation management Service Offering • Consistent in-store experience • Redefined selling approach • Consistent store appearance • Optimized tire assortment Scalable Platform to Enhance Customer-Centric Dr
Slide 48: Accelerate Productivity & Team Engagement
Accelerate Productivity & Team Engagement Optimized Store Achieve the right balance of labor and technical abilities across our stores Staffing Model Implement data-driven store scheduling software Clearly Defined Career Path Attract, train and retain talented technicians and managers and Enha
Slide 49: Data-Driven Staffing and Scheduling
Data-Driven Staffing and Scheduling Leverage Technology to Simplify and Optimize Store Staffing and Scheduling Optimize Staffing Model ▪ Align management headcount to the sales volume and growth potential of the store ▪ Right-size technician skill-level based on the sales mix of each store ▪ Leverag
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 m
Slide 51: Store Compensation Model Aligned with Performance
Store Compensation Model Aligned with Performance New Compensation Model Connects Incentives 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 E
Slide 52: Key Takeaways
Key Takeaways ▪ Drive improved in-store experience through optimized merchandise strategy ▪ Increased conversion and average ticket through clear customer communication ▪ Develop a comprehensive learning management system and offer a clear path for career advancement to effectively attract, develop
Slide 53: Brian D'Ambrosia
Brian D’Ambrosia Senior Vice President of Finance & Chief Financial Officer 53
Slide 54: Driving Long-Term Sustainable Growth
Driving Long-Term Sustainable Growth Improve Customer Experience Optimize Product & • Online reputation management Service Offering • Consistent in-store experience • Redefined selling approach • Consistent store appearance • Optimized tire assortment Scalable Platform to Enhance Customer-Centric Dr
Slide 55: Scalable Platform to Drive Sustainable Growth
Scalable Platform to Drive Sustainable Growth A Scalable Business Model with Multiple Avenues for Growth Same Store Sales Growth ▪ Through Monro.Forward, drive higher customer retention and acquisition rates Acquisitions ▪ Create value through profitable ▪ Continue to increase store density in our 2
Slide 56: A Proven M&A Strategy
A Proven M&A Strategy Monro’s Acquisition Strategy Has Delivered Significant Growth Over the Years A Proven Track Record ▪ 45 acquisitions in the last 16 fiscal years, encompassing 681 locations and $900 million of revenue ▪ 29 acquisitions in the past 6 fiscal years, adding 386 locations and $520 m
Slide 57: Data-Driven Go-Forward M&A Strategy
Data-Driven Go-Forward M&A Strategy Efficient Acquisition Identification and Integration Using an Analytical Approach Top 10 National Chain Market Share Significant Consolidation Opportunity Other 86% ▪ Tire and Auto Service remains a highly fragmented industry Top 10 National ▪ Leverage consumer de
Slide 58: Growing Shareholder Value Through Monro.Forward
Growing Shareholder Value Through Monro.Forward Solid Fiscal Year 2018 Reported results in-line with Company expectations Results Drive earnings growth through same store sales improvement Fiscal Year 2019 Outlook Focus capital investments on supporting strategic initiatives Accelerate same
Slide 59: Solid Full Year Fiscal 2018 Results
Solid Full Year Fiscal 2018 Results Solid Fourth Quarter Performance and FY18 Results In-Line with Expectations FY18 4QFY18 4QFY17 Δ FY18 FY17 Δ Guidance Sales (millions) $285.6 $252.0 13.3% $1,127.8 $1,021.5 10.4% $1,120 - $1,135 Same Store Sales 2.4% -8.0% 1,040 bps -0.1% -4.3% 420 bps -0.5% to +0
Slide 60: Fiscal 2019 Outlook
Fiscal 2019 Outlook Delivering Growth Today While Investing for Tomorrow Operating Margin ▪ Assumes operating margin of 11.1% at midpoint of FY19 sales guidance FY19 FY18 Δ (11.4% excluding Free Service) ▪ Expect stable tire and oil costs year-over-year Sales (millions) $1,170 to $1,200 $1,128 3.7%
Slide 61: Fiscal 2019 Outlook – EPS Bridge
Fiscal 2019 Outlook – EPS Bridge $2.40 $0.02 ($0.02) $0.40 $0.17 ($0.07) $2.15 ($0.13) $2.35 $1.90 $1.98 $1.65 FY18 Adjusted EPS * 2% Comp Sales Inflation Initiative Investments FY19 Tax Reform FY18 Acquisitions Other FY19E GAAP EPS Increase Impact Note: Guidance bridge based on midpoint of FY19 EPS
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 Capital Investment Area Store Refresh Initiative (Capital Spending by Area, $ in Million) Renovation Plus Refresh Light $39.1 $47.0 100% 3.8 5.4 90% IT
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 Same Store Sales Growth Accelerate from 2% to above 4% Operating Margin Return to 12%+ Operating Margin Expansion Earnings Per Share Growth Deliver Consis
Slide 64: Three-Year Organic Growth Financial Targets
Three-Year Organic Growth Financial Targets Building Momentum through Fiscal Year 2021 5.0% SSS Improvement 4.0% + 4.0% ▪ Expect performance to ramp as we move towards FY 2021, with 3.0% momentum building as we implement our initiatives 2.0% 2.0% 1.0% ▪ Executing on Monro.Forward strategy to drive a
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 M&A Opportunities ▪ On average, highly a
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 66
Slide 67: Brett Ponton
Brett Ponton President & Chief Executive Officer 67
Slide 68: Monro.Forward Strategic Initiatives
Monro.Forward Strategic Initiatives Q4 FY18 FY19 Q2 FY19 Q3 FY19 Q4 FY19 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY21 Foundational technology & tools Scale store refresh & operational Pilot store excellence Improve Customer refresh & operational Technology based in-store experience Experience excellence Schedu
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 s
Slide 70: Questions & Answers
Questions & Answers 70