Auto repair chain Monro Muffler Brake Inc. (MNRO: Quote), Thursday reported a higher profit for the fourth quarter, driven largely by a double-digit revenue growth. Nevertheless, the company detailed a weak earnings outlook for the first quarter and full year. The soft outlook disappointed investors, sending Monro Muffler shares down 8 percent on the Nasdaq.
Monro Muffler's results reflect overall weakness in the industry, with the bottom line of many companies being negatively impacted by rising fuel costs as well as by the uncertain economic conditions.
Chief Executive Robert Gross said, "Our fourth quarter performance reflects the ongoing challenges facing consumers in the current economic environment. With higher gas and food prices, high unemployment and an unseasonably warm winter, the cautious consumer continues to defer and prioritize purchases."
Fourth-quarter gross margins dropped to 38.7 percent from 40.1 percent, as tire and oil costs increased. Monro Muffler's decision to not to pass certain costs to customers also impacted margins.
Meanwhile, the company was able to lower its operating expenses, helped by operating leverage and more number of days in the quarter. Operating expenses, as a percent of sales, dropped to 28.6 percent from 30.5 percent.
Monro Muffler's sales for the quarter grew 13.9 percent to $171.7 million from $150.8 million last year. Comparable store sales increased 7.4 percent.
Rochester, New York-based Monro Muffler's profit for the fourth quarter increased to $10.5 million or $0.33 per share from $8.2 million or $0.26 per share a year ago. On average, five analysts polled by Thomson Reuters expected earnings of $0.35 per share. Analysts' estimates typically exclude special items.
Earnings for the latest quarter included about $0.03 per share in due diligence costs related to Midas, which was sold to a higher bidder.
Looking forward to the first quarter, the company expects earnings in a range of $0.35 to $0.40 per share. Analysts currently expect earnings of $0.55 per share. Comparable store sales for the quarter is anticipated to drop to a range of 5 to 7 percent.
"As we look forward, we continue to have a positive long-term outlook for our industry and company, though we are more cautious near-term as we believe that higher gas prices and the macroeconomic environment will continue to weigh on consumer sentiment and purchasing behavior. The first quarter has started off weaker than we anticipated and our comparable store performance in fiscal 2013 will be dampened due to these challenges," Gross added.
For the full year 2013, Monro Muffler expects earnings of $1.65 to $1.85 per share and revenues of $750 million and $775 million. Analysts currently anticipate earnings of $1.95 per share on revenues of $744.28 million.
Monro Muffler expects comparable store sales for the full year to increase in a range of 0 to 3 percent.
The company also boosted its quarterly dividend by a penny to $0.10 per share, payable on June 14 to shareholders as of June 4.
MNRO is currently trading at $34.35, down $2.65 or 7.16%, on a volume of 1.5 million shares.
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by RTT Staff Writer
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