Monro, Inc. (MNRO) Q4 2019 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to Monro Inc.'s Earnings Conference Call for the Fourth Quarter of Fiscal 2019. At the time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] And as a reminder, ladies and gentlemen, this conference call is being recorded and may not be reproduced in whole or in part without permission from the Company. I would now like to introduce Ms. Maureen Mulholland, Senior Vice President, General Counsel and Secretary at Monro. Please go ahead.

Thank you. Hello, everyone, and thank you for joining us on this morning's call. Before we get started, please note that as a part of the call this morning, we will be referencing a presentation that is available on the Investors section of our website at corporate.monro.com/investor/investor-resources. If I could draw your attention to the Safe Harbor statement on Slide 2, I would like to remind participants on this morning's call, that our presentation includes some forward looking statements about Monro's future performance. Actual results may differ materially from those projected by our comments today. The most significant factors that could affect future results are outlined in Monro's filings with the SEC and in our earnings release. The Company disclaims any intention or obligation to update or revise any Forward-Looking Statements whether as a result of new information, future events or otherwise except as required by law. Additionally, on today's call management's statements include a discussion of certain non-GAAP financial measures. Reconciliations of such supplemental information to the comparable GAAP measures will be included as part of today's presentation. With that, I would like to turn the call over to our President and Chief Executive Officer, Brett Ponton. Brett.

Thank you, Maureen, and good morning, everyone. Thanks for joining us today. Before diving into our fourth quarter performance, I’m very pleased to report that we have delivered a very strong year in-line with our guidance and made tremendous progress towards the execution of our Monro Forward Strategy that we unveiled at our Investor Day, one year ago. We achieved several critical milestones in our effort to build a scalable platform for sustainable growth in fiscal 2019. And we are encouraged by the continued momentum we are experiencing in our business as we enter fiscal 2020. Most recently in our fourth quarter, we delivered solid top-line growth achieving a comparable store sales increase of 0.5% when adjusted for fewer selling days, primarily resulting from one less week compared to the prior year quarter. We are pleased to have achieved positive comps on top of positive comps in the fourth quarter of last year, posting our fifth consecutive quarter of comparable store sales growth and our first full-year of comparable store sales growth since fiscal 2012, on a 52 week basis. This is a testament to our focus and efforts in driving operational excellence and the outstanding commitment of our teammates, who have worked Tirelessly to deliver a consistent five star experience to all our customers. As illustrated on Slide 3 and in-line with what we discussed on our last earnings call, we experienced temporary softness around December holiday period and in early January. We experienced the rebound in comparable store sales in February and March despite more difficult year-over-year comparisons. As we enter the spring service selling season in the first quarter of fiscal 2020, we are encouraged to see this momentum has continued with comparable store sales up approximately 2% quarter to-date, despite cold and wet spring weather tempering performance. Our positive for quarter comp performance was driven by higher average ticket from strong in-store execution, as well as sustained strength in our break category, the positive trend we expect to continue in fiscal 2020 as we capitalize on the initiatives we rolled out this year. Moving on to our performance by category in the fourth quarter, I would like to start with the trends we saw in our Tire business, our largest category, which represents half of our sales. We experienced a 1% decline, in Tire comparable store sales adjusted for days, driven by lower unit volume, partially offset by a higher ticket. We believe this was partially driven by consumers making trade-offs and prioritizing breaks over Tires due to lower than expected income tax refunds. Overall, trends in our Tire business improved throughout the quarter. Our optimized Tire sales and pricing strategy continues to bear fruit and we are encouraged to see that the optimization of our Tire assortment, which I will comment further on in a moment is driving accelerated Tire comparable sales growth in the first quarter-to-date. Turning to our service and repair categories, we continue to capitalize on a strong demand for brakes, which was our strongest performing category again this quarter with an increase of 8% in comparable brake sales adjusted for days. Similar to previous quarters, our optimized good, better, best brake package pricing combined with higher brake transaction volume contributed to gross margin expansion this quarter. In our remaining categories adjusted for days, comparable store sales were up slightly for alignments and flat for maintenance, while front end shocks declined year-over-year. For the fourth quarter as a whole, our Northern markets outperformed our Southern markets, however, as expected, we saw our Northern markets underperform in the month of January due to mild weather conditions. Lastly, new stores added $17.7 million in revenue, including $14 million from recent acquisitions. Moving on to Slide 4. We continue to actively capitalize on acquisition opportunities, which remain a core pillar of our growth strategy. We have made a significant strides in diversifying and strengthening our store footprint with the completion of our previously announced acquisition of 40 certified Tire and Service Center stores and one distribution center in California. This acquisition expands our geographic footprint to the west coast, and provides us with a strong platform for further expansion into a dynamic and attractive region. We had expanded our team including hiring a West Coast head of Operations, and established a proper corporate infrastructure to support our California operations, demonstrating our commitment to securing a solid foundation for growth in this region. We believe these strategic actions will position us well to capitalize on future opportunities in this market. In addition, as part of our larger brand consolidation efforts, which I will discuss further in a moment, we will be rebranding these stores under the Tire Choice Auto Service Centers banner. This acquisition closed in the first quarter of fiscal 2020 and is expected to add approximately $45 million in annualized sales, representing the sales mix of 70% service and 30% Tires, and to be breakeven or diluted earnings per share and fiscal 2020. In addition, we completed the previously announced acquisition of 12 stores in Louisiana early in the first quarter of fiscal 2020, expanding our store footprint in another new state and building out our geographical presence in the South. These locations are expected to add approximately $15 million in annualized sales, representing the sales mix of 35% service and 65% Tires. Overall, acquisitions announced and completed in fiscal 2019 collectively represent an expected $132 million in annualized sales, or 11% of annualized sales and our M&A pipeline remains robust with over 10 NDA signed with opportunities ranging from five to 40 stores. As you saw in this morning's press release, we are pleased to have extended our revolving credit facility to continue to take advantage of further consolidation opportunities. Importantly, we believe that the continued execution or Monro Forward initiatives to standardize our in-store operating procedures and brand standards will position us to more effectively and efficiently integrate these and other acquisitions. Lastly, we opened three Greenfield locations during the fourth quarter, bringing our total Greenfield store openings to 21 in fiscal 2019. Moving on to Slide 5. This month marks the one year anniversary of our Monro Forward Strategy that we unveiled at our Investor Day last year. Over the course of fiscal 2019, our team has made tremendous progress towards the execution of our initiatives across each of our four areas of focus, in-line with our plan. The execution of our Monro Forward Strategy has been instrumental in driving momentum this year, and creating a scalable platform for future growth. Now, I would like to take a moment to provide an update on the key milestones we achieved during the fourth quarter. First we remain focused on improving the customer experience, our efforts to enhance customer satisfaction has lead to a dramatic improvement in our online reputation as evidenced by our average 4.8 star rating during the fourth quarter, the highest quarterly star rating received to-date, which brings our all-time average star rating to 4.5 stars as compared to $3.6 before we start the rollout of our customer survey and online review program. We are very encouraged by these results and continue to believe our focus on customer satisfaction will translate into improved customer retention, which in turn will drive more customers to our source. Importantly, we combine the feedback we collect from customers with the implementation of our new standardized in-store operating procedures, which we call the Monroe Playbook to drive operational improvement and deliver a consistent five-star experience in each of our stores. Overall, we are pleased to see that our clear and consistent selling approach coupled with our stronger merchandising strategy across good, better and best product options drove higher in-store conversion in the fourth quarter. To complement our Monroe Playbook, we also established clear brand standards to align and modernize the appearance of our stores while driving further consistency across all our locations that currently include a wide range of stores and formats. Turning to Slide 6. I would like to provide more details surrounding our brand consolidation strategy. As many of you know, we have acquired several regional brands over the years and operated two store formats in the majority of our key markets with a focus on increasing store density. This brings us significant competitive advantages when it comes to sharing inventory and leveraging our distribution network across our store base. As part of our broader store refresh initiative, we will be leveraging customer data analytics and local brand awareness to consolidate our existing nine retail banners into five regional power brands and take advantage of this opportunity to convert service stores to Tire stores when we identify targeted demographics that favor a Tire store format. As we have mentioned previously, our service stores generate approximately $600,000 in annualized sales while our Tire stores generate approximately $1.2 million in sales. Additionally, Tires make up a significant portion of the automotive aftermarket. By optimizing brand awareness and banner concentration in targeted markets we can increase our sales and relevancy in the marketplace without sacrificing service revenues. Importantly, last year we piloted this rebranding strategy at a district in the mid Atlantic, shifting our few selected stores to a Tire oriented brands. We are pleased to report these pilot stores are showing a meaningful improvement in both conversion and traffic. Importantly, the results of this pilot program were in-line with the forecasts of our analytic model which gives us confidence in the execution of our brand consolidation strategy going forward. Building upon the results of these pilot stores we will analyze customer data, brand awareness and banner concentration market-by-market and we will be methodically prioritizing markets where we see the strongest potential for increased visibility and traction of our Tire banners. Overall, our goal is to increase brand awareness in our regional markets while lining our store banners with market demand to optimize growth, specifically where we identify opportunities for higher Tire sales. Moving on to Slide 7. We are very encouraged by the early results of our store refresh initiative, and the tremendous opportunities that lie ahead. Following a successful refresh of 31 pilot stores in Rochester, New York during the third quarter, we are very pleased to see that the implementation of our Monro Playbook and the completion of our stores reimaging has led to a sequential improvement in traffic and comparable store sales trends at these stores from the third quarter to the fourth quarter of fiscal 2019. Additionally, we have experienced meaningful improvement across every customer experience metric at these stores. Among the metrics we examine, we saw our average star rating at these pilot stores jump from a 4.4 prior to the reimage, up to a 4.8 at the end of the fourth quarter. These results are very encouraging and reinforce the impact that operational excellence and a consistent best-in-class experience in half of our customers. We have now begun to scale this initiative, starting with a refresh of approximately 50 stores in our Southern markets in the first quarter of fiscal 2020. We plan on rolling out our brand operational standards across our store-base, and modernizing our store portfolio over the next three to five years. We are leveraging data analytics to drive this process and ensure we are investing the appropriate amount of capital and prioritizing where that capital spend to achieve the highest possible returns. As previously discussed, we will prioritize our newly acquired stores as we believe the implementation of our standardized in-store operating procedures and brand standards will benefit our integration process and drive higher returns. Moving on to Slide 8. I would like to provide an update on our customer centric engagement initiatives. During fiscal 2019, we repurposed our marketing spends to invest in data driven customer relationship marketing, and customer acquisition campaigns. Following the rollout of our new data analytics based CRM platform, we have focused our customer retention efforts on delivering tailored messages and service recommendations to our customers based on their specific vehicle needs. The initial results show that leveraging customer data and insights leads to a notable increase in customer visits, giving us confidence that this strategy will allow us to increase the overall lifetime value of our customers. In the fourth quarter, we also launched data driven campaigns to acquire new customers, by leveraging market segmentation of demographic data specific to geographic area surrounding arm and Monro locations, we focused our pilot campaigns on targeting high value potential customers with a higher propensity to purchase or service entire offerings. In fiscal 2020, we will continue to focus our investment in higher ROI channels and capitalize on the opportunities we have identified to meet our current and future customers, where they are. Moving on to our omni-channel strategy and the development of our online presence, I’m thrilled to announce that we doubled the scope of our collaboration with Amazon.com to provide Tire installation services to their customers at over 800 stores across 21 states. We have been very pleased with the smooth rollout of this program since it started in July of last year and very encouraged by the positive customer feedback and average 4.6 star rating across the locations where this program has been rolled out. These services are now available to amazon.com customers across approximately two-thirds of our store footprint and we are on-track to expand this program to all Monro retail locations across 30 states. Our preferred Tire agreements with online retailers are a key initiative or omni-channel strategy. And this expanded collaboration underscores the strong progress we have made as we continue to develop our online presence. Lastly, following the modernization of our retail and corporate websites in fiscal 2019, we expect to complete the final phase of our omni-channel build-out in the second half of fiscal 2020. Once fully rolled out, our customers will be able to view and purchase Tires online and seamlessly scheduled an appointment for in-store installation. Turning to our initiatives to optimize our product and service offering on Slide 9. Providing customers with clearly defined options, relevant to all consumer price segments is at the core of our strategy. The momentum of our good, better best merchandising strategy launched across her store based on the first quarter has carried throughout the year. Our good, better, best assortments are driving higher in-store conversion, as evidenced by the significant increase in demand for brakes for the past four consecutive quarters. As we continue to optimize our Tire assortment, we are focused on becoming the number one destination for Tires at any price point. To that end, we are leveraging our scale and choosing suppliers for optimum brand and pricing assortment to create the best value for our customers and for Monro. Specifically, we have identified opportunities to expand our Tier-2 branded Tires assortments, as we want to offer great value for our customers at any price point. Therefore in the fourth quarter, we introduce new branded Tires, rounding our assortment mix, while optimizing branded Tire margins. As you may know, our private label Tires continue to represent approximately 40% of Tire units and remain a key competitive differentiator, allowing us to provide our customers significant value at opening price point levels. Now I would like to provide an update on our productivity and team engagement initiatives. Following the launch of our Monro University training program pilot in the third quarter, we rolled out our comprehensive cloud based learning management system to our recently acquired stores in California, which will be instrumental in facilitating the on-boarding of our new teammates. We plan on deploying our Monro University training platform in our remaining markets throughout the balance of the year. This is a major step to improve the experience of our teammates and provide them with best-in-class training. As part of our initiatives to attract and retain the right talent our Monro University platform is designed to help develop a career path for 8600 teammates and fulfill their desire to grow and advance their career at Monro. Importantly, we are aligning our teammates developmental objectives with our business objectives, as this training program will also provide our team with the technical skill set needed to effectively serve our customers today and tomorrow as vehicles become increasingly complex with the adoption of technology. The feedback from our teammates who are part of the pilot program, as well as our district managers has been positive and we are confident that these training programs will contribute to improving the in-store experience along the way. Overall, our initiatives to support our teammates' professional development has resulted in increased teammate engagement, higher satisfaction and continued decline in our quarterly turnover, which reached its lowest level since the fourth quarter of fiscal 2015. Lastly, we remain focused on accelerating store productivity and we will move forward with the second phase of our stores staffing optimization in the second half of fiscal 2020. As previously mentioned, we will implement a cloud-based data driven store staffing and scheduling system to drive further staffing efficiencies by more accurately rebalancing the level of technical skills in each store. Ensuring our stores are staffed with technicians that have the appropriate skill level for the services required. This will be further supported by our mobile app, allowing our teammates to easily pick up shifts and give them the flexibility that they need to increase their hours and earnings. To conclude, I would also like to thank all our teammates who have helped deliver a solid year of growth in fiscal 2019. I'm very pleased with the continued traction of our Monro Forward initiatives and look forward to continued progress in fiscal 2020. With that, I will turn the call over to Brian, who will provide additional detail on our quarterly and full-year financial performance and discuss our fiscal 2020 outlook.

Thank you, Brett and good morning everyone. Turning to Slide 10. We delivered solid top-line performance in the fourth quarter. Sales increased 0.6% year-over-year to $287.2 million, driven by sales from new stores of $17.7 million included $14 million from recent acquisitions; partially offset by a same-store sales decrease of 5.7% on a reported basis and a decrease in sales from closed stores of approximately $0.8 million. On an adjusted basis, same-store sales increased 0.5%. Please note fiscal 2019 was a 52 week year with 361 selling days as compared to 368 selling days in fiscal 2018, which included an extra week of sales in the fourth quarter. Gross margin increased 60 basis points to 38.3% in the fourth quarter of fiscal 2019, from 37.7% in the prior year period. This increase was largely due to the ongoing benefits of our service packages as well as the continued benefits from our optimized store staffing model, partially offset by the impact of sales mix from the free Service Tire acquisition. As we have previously mentioned, the commercial and wholesale locations we acquired as part of the part of the free Service Tire acquisition operate at a lower gross margin, primarily due to the higher mix of Tires and with respect to the wholesale business, a higher sales mix of Tire without installation. As a reminder, we will lap the impact of this acquisition in the first quarter of fiscal 2020. Operating expenses for the quarter increased $4.3 million and were $81.6 million or 28.4% of sales as compared with $77.3 million or 27.1% of sales for the prior year period. The year-over-year dollar increase includes $1.5 million in cost related to our Munro Forward initiatives, as well as expected from 47 net new stores, three net new wholesale locations and higher incentive base pay related to improve current year financial performance. Our operating income for the fourth quarter was $28.5 million which decreased by 6.5% as compared to operating income of $30.4 million for the same quarter last year, a decrease as a percentage of sales from 10.7% to 9.9%. The decrease in operating income is due primarily to the impact of less selling days in the current year quarter as compared to the prior year period. Net interest expense for the fourth quarter increased $0.5 million as compared to the same period last year. Weighted average debt outstanding for the fourth quarter of fiscal 2019, increased by approximately $2.8 million as compared to the prior year period. The increase is primarily related to an increase in capital lease debt recorded in connection with our fiscal 2019 acquisitions and Greenfield expansion, partially offset by a decrease in debt outstanding under our revolving credit facility. The weighted average interest rate for the fourth quarter increased by approximately 70 basis points year-over-year, largely due to higher LIBOR and prime interest rates. Our effective tax rate was 21.6% for the fourth quarter compared to 27.9% for the same period last year. The decrease is due primarily to a reduction in the federal income tax rate, as a result of the Tax Cuts and Jobs Act. Net income for the fourth quarter was $16.8 million compared to $17.5 million in the prior year period. Diluted earnings per share were $0.50, including $0.01 per share, of one-time incremental costs related to increased acquisition activity in the fourth quarter of fiscal 2019. This compares to $0.52 in the prior year period, which included $0.02 per share in management transition costs, $0.04 per share of benefit related to the Tax Cuts and Jobs Act, and $0.10 per share of contribution from the extra week. Excluding these one-time items, diluted earnings per share was $0.51 for the fourth quarter of fiscal 2019 compared to $0.40 in the prior year period, representing a 28% increase year-over-year. Lastly, we opened three Greenfield locations during the fourth quarter, bringing our total Greenfield store openings to 21 in fiscal 2019. As a reminder, Greenfield stores include new construction, as well as the acquisition of one to four store operations. These locations are expected to add approximately $1 million each in annual sales. For the full-year fiscal 2019, sales increased 6.4% to a record $1.2 billion in-line with our guidance. The total sales growth was driven by $71.7 million increase in sales from new stores, including $53.6 million from recent acquisitions, while comparable store sales increased 2.3% on an adjusted basis, compared to a 0.1% decrease in the prior year. Diluted earnings per share were $2.37 for the full-year at the high end of our guidance range. Fiscal 2019 diluted EPS included $0.05 per share, and one-time costs related to Monro Forward investments, $0.01 per share in one-time costs related to increased acquisition activity in fiscal 2019 and $0.01 per share in corporate and field management realignment costs. It also reflected $0.06 per share benefit, from a one-time Income Tax adjustment. As of march 30, 2019, the Company had 1197 Company operated stores in 98 franchise locations, as compared with 1150 Company operated stores and 102 franchise locations as of March 31 2018. Please note that these numbers do not include the stores acquired in Louisiana and California, as these acquisitions closed early in the first quarter of fiscal 2020. During the fourth quarter, we added 15 Company operated stores and closed four. Turning to Slide 11. As we continue to execute on our growth strategy, we remain committed to our disciplined approach to capital allocation. Our capital expenditures were $44 million in fiscal 2019, of which $7 million was related to investments in our Monro Forward initiative. Our Monro Forward strategy is progressing on-track and we continue to expect an incremental $75 million in capital expenditures above our normal run rate over five years to support investment in-stores, reimage and technology. Additionally, executing on accretive acquisition opportunities remains a pillar of our growth strategy and during fiscal 2019, we spent approximately $62 million on acquisitions, including one to four store acquisitions completed as part of our Greenfield expansion strategies. We are also maintaining our strong commitment to return interest to shareholders through our dividend program, as evidenced by the increase in our dividend 14 times since we initiated a dividend program 14 years ago, including the 10% increase in the dividends announced today, we paid approximately $27 million in dividends in fiscal 2019. Finally, we remain focused on maintaining a solid balance sheet with ample flexibility to support our growth and profitability initiatives. We ended the quarter with strong leverage ratios and have ample room under our financial covenants. We generated approximately $153 million in cash flow from operating activities in fiscal 2019. As we announced in this morning's press release, we entered an agreement to amend and extend our existing five year $600 million senior secured revolving credit facility with eight banks. Interest only is payable monthly throughout the credit facilities term. The agreement permits the company to repress up to $250 million of additional availability an increase of $150 million from the private financing agreements. As of today, we have approximately $441 million available to borrow under this facility. Now turning to our outlook for fiscal 2020 on Slide 12. Based on current visibility, business and economic trends, the expected contribution of recent acquisitions and our performance quarter-to-date, we expect fiscal 2020 sales to be in the range of $1,295,000,000 to $1,325,000,000, an increase of 8% to 10% compared to fiscal 2019 sales. Fiscal 2020 sales guidance assumes a comparable store sales increase of 2% to 4%. As Brett mentioned, we are off to a strong start to the year with same-store sales up approximately 2% quarter-to-date, despite cold and wet spring weather. Our guidance assumes stable overall higher in oil costs compared to fiscal 2019. A mid ongoing macro concerns including global tariffs and other material cost pressures our vertically integrated and diversified supply chain continues to drive our costs leadership position and remains a key differentiator in our industry. As we have mentioned previously, any tiring oil costs increase not mitigated by our differentiated supply chains are expected to be passed on to consumers. However, any such costs and related price increases are not assumed in our fiscal 2020 guidance. Based on these assumptions, we expect to generate earnings growth and a comparable store sales increase above approximately 1%. Overall, we expect fiscal 2020 earnings per diluted share to be in the range of $2.55 to $2.75, representing earnings growth of 8% to 16%. This guidance includes approximately $0.04 to $0.06 in accretion from fiscal 2019 acquisitions. Acquisitions completed in fiscal 2020 are expected to be breakeven to earnings per diluted share during the year. At the midpoint of our guidance range, we expect an operating margin of approximately 11.3%, interest expense to be approximately $32 million, depreciation and amortization to be approximately $67 million and EBITDA to be approximately $215 million. We expect capital expenditures to be approximately $65 million this year. This guidance reflects an effective tax rate of approximately 23.5% and is based on 33.9 million diluted weighted average shares outstanding. Our fiscal 2020 guidance include the recently completed acquisitions in California and Louisiana. As always, our guidance does not assume any future acquisitions or Greenfield store openings. Finally, we are reiterating our longer-term organic growth financial targets. We continue to expect that our Munro Forward strategy will accelerate same-store sales growth, which will drive operating leverage and double-digit earnings growth. As a reminder, these targets include 4% plus in same-store sales growth, the return to 12% plus operating margin and consistent 10% to 15% earnings growth by 2021. I will now turn it over to Brett to provide some closing remarks before we move to Q&A.

Thanks, Brian. In summary, we had a very good year in fiscal 2019. We delivered strong results in-line with our guidance, driven by solid comparable store sales growth throughout the year. Our Monro Forward initiatives continue to progress well one year after launch. Among the key milestones we reached in fiscal 2019, we implemented our good, better, best merchandising strategy, completed the first phase of our store staffing model optimization, developed our online presence with our Amazon.com collaboration and the modernization of our website, launched our data driven CRM platform and completed our Munro Playbook and store refresh pilot. Disciplined acquisition remain the cornerstone of our strategy with the acquisitions we announced this year, reaching 132 million in annualized sales. Building off this solid platform we believe we are well positioned to capitalize on future growth prospects and drive strong value for our shareholders in fiscal 2020 and beyond. With that, I will now turn the call over to the operator for questions.

[Operator instructions] Thank you. Our first question comes from the line of Brian Nagel with Oppenheimer. Please proceed with your question.

Hi good morning, thank you for taking my questions. So I have two questions I guess. First off, we discussed a bit in the prepared comments as weather, obviously there has been a lot of talk about weather once again been volatile. Looking to results, how should we think about the weather impacts here, and I’m thinking specifically if you could maybe call out the what - I assume a negative impact in fiscal Q4 results potentially negative here early in fiscal Q1. What kind of benefit could we get from a harsher winter as we progress further into spring into the new fiscal year.

Good morning, Brian this is Brett. If you recall our last call, we talked about pretty soft holiday selling season. December and January pretty soft primarily on Tires in particular. As we rolled into the new calendar year, we saw our comp sales progressively improve throughout the quarter, despite a strong comparable year we are up against. I think as we think about the harsher winter, you would expect that to translated into a strong spring selling season, which we still expect, just coming a little bit later in the year than we normally would see, typically around late March and April and May. So we are optimistic we are off to a good start, I think in Q1 despite that, but expect some of that normalized spring service demand, that you would expect to see as consumers prepare for the summer driving season is still ahead of us, as we have yet to see that the weather conditions to get consumers out and focusing on their vehicles to prepare for the summer.

Thanks, that is helpful. And then the second question I had with regard to Amazon and the expanding partnership there, any update on how we should consider or think about the economic sort of financial implications of this relation with Amazon for the Monro model? Brian D’Ambrosia: If you recall, the expansion with Amazon is just an extension of an existing strategy, the Company has executed relationships with other online Tire retailers and we are not going to comment or parse out the performance that we enjoy with Amazon relative to others. But we would characterize that performance towards the end with Amazon certainly is in-line with what we see with our other online partners. And certainly the motivation behind us wanting to expand that relationship to another 400 locations this quarter. And just to remind people on the thesis, the benefits that we see to our Company, certainly as we analyzed our historical relationships for the most part and up to about 50% of time, most of these consumers that we see for Tire installation are new to our brand. So it gives us a great opportunity, I think to drive traffic and build a relationship with a consumer that allows us to not only convert that Tire installation to other services when they are at the store, but also allows us to build long-term relationship with them via our CRM platform going forward. The Economics, certainly we don't sell the Tire as it relates to Tire installation, but the installation revenue itself certainly has high margins, given the high labor content and low material cost of installation, as well as the opportunity for us to add on incremental high margin sales when the consumer is at the store. So we still think this is a net creative strategy for our Company and we will look to expand relationships with Amazon as we progress throughout the year, as well as collaborate with other online retailers going forward. And you know it certainly doesn't change our go forward strategy to build out our own omni-channel strategy as we commented about, in the second half of this year, we intend to launch our own online transaction capability, online as well with consumers Brian.

Well, thank you very much. Best of luck for the coming quarter here. Brian D’Ambrosia: Thanks, Brian.

Thanks, Brian.

Our next question comes from the line of Bret Jordan with Jefferies. Please proceed with your question.

Hey, good morning, guys.

Good morning, Bret.

I guess to follow-up I mean not specifically on Amazon, but just as it relates to your all of your online installation partners. Could you give us a feeling for maybe that the volume that you do for third-party install versus your sold Tire?

Maybe to step this up Bret, I will remind everybody what the industry sees is the online penetration rate for consumers that buy Tires online, and that is been characterized as mid-to-high single-digits call it 7% to 8% of all Tire sold in the U.S. are bought online. And to give you a reference point for Monro, as we look at the amount of installations that we do, is in-line with what the industry is. So call it 7% to 8% of our installations would be incremental versus the tires that we sold and installed to consumers directly for Monro...

Okay, great. Okay, and then Brian, I guess, housekeeping. Could you give us the monthly comps breakout? Brian D’Ambrosia: Yes, sure. January was down two, February up three, March up one.

Okay, great. And then one final question, I guess, as you think about building out more stores in the Southeast. Where are we as far as distribution infrastructure? I know you talked about putting in a DC down there or possibly acquiring business with the DC. But what is the timing of that incremental side of the business?

Two points to consider on that Bret. One is, now that we have made a further acquisition in Southern Florida that takes our store accounts to north of 100 stores in the Florida area, it certainly [warrants] (Ph) I think a could distribution center. The second part of plans here is related to our shift in strategy. Given the fact we have acquired a pretty strong wholesale business, now, we operate under the brand Tires Now, our intention is to expand going forward using a Tires Now location that serves as both a distribution center, but also a profit center as we look to leverage scale and build out our presence in Florida as well. We are currently considering options in Florida to expand there, and we will likely make a decision in this next quarter for execution in the second half of FY 2020.

Okay, great. Thank you.

Thank you. [Operator Instructions] Our next question is from the line of Scott Stember with C.L.King. Please proceed with your question.

Good morning, guys and thanks for taking my questions.

Good morning, Scott.

Just the question on the last call, I guess, maybe we are talking about apples and oranges here. But you had said that your January sales were running up about 2% the same-store on a reported basis. But here you are saying they were down 2% for the month of January. Was there something that happened in between I guess when you guys reported towards the end of the month? Was there any different trends or are we just talking reported basis versus adjusted basis? Brian D’Ambrosia: Yes Scott, this is Brian, I will take that. We reported that January was up two on a reported basis and lower by low 300 basis points are down one when adjusted for days. So that down to number I gave you was also adjusted for days.

Okay, got it. Thanks. That clears that. Thank you very much. And maybe just going out to California, obviously it looks like a very nice deal for you guys, obviously in a different sandbox, maybe just talked about some of the economics of the stores there, the costs, the store density and competition, just give us an idea of, how these markets compared to some of your other core markets that you have over on the East Coast? Brian D’Ambrosia: Sure, Scott. I think maybe I will first start with the rationale for going to California. I think it probably goes without saying California is the single largest market for vehicles in the United States with over I think 15 million vehicles registered and that that puts it at roughly 2x the market potential that a state like Florida has. So tremendous amount of market potential out there, that we felt like Monro was well positioned to capitalize on and as we have desire to become a national retailer and certainly starting in the largest market out West and moving our way back to the East makes lot of sense. If you think about certified in general, we like to certify transaction because it gave us penetration and the three largest DMAs in California, store representation in San Diego, LA and San Francisco and also the fact that it had a distribution center with it allowed us to fully capitalize on our supply chain strengths virtually, immediately under our ownership. As it relates to the economics, I won't comment on the deal dynamics here, but I will say in terms of the price we paid for the acquisitions is in-line with other deals that we have done historically, so not on outsized in terms of valuation there. The actual economics of the store themselves as you can see with the revenue reported 45 million across 40 stores. So the [either] (Ph) economics are in-line, actually slightly higher than our service store revenue and as we commented on the call, we intend to banner these stores, Higher Choice Auto Service Centers to give us the opportunity to continue to maintain a focus on service, but also improve our relevancy on the Tire category as well.

Gout it. And just last question on the balance sheet at 2.15 times that the EBITDA ratio, what is your comfort zone, there is a good chance you will still be highly inquisitive. So what is your comfort threshold and max that you will go up to?

Yes. I think we have got at least another turn there, if you think about where that 2.15 is, a lot of that is capital leases on our balance sheet. We are currently less than one when you look at it, I’m sure lease funded bank debt. So still have a pretty conservative balance sheet and defiantly have a comfort to take on a little bit more leverage here.

Got it. Thanks again.

Thank you.

Thank you. At this time, I will turn the floor back to management for closing remarks.

Thank you all for joining us today and for your interest and support of Monroe. We are very pleased with our 2019 performance and believe we are well-positioned for another strong year ahead. As we continue to execute our strategy. We look forward updating you all on our progress next quarter. Have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.