Monro, Inc. (MNRO) Q4 2021 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen and welcome to Monro, Inc.’s Earnings Conference Call for the Fourth Quarter and Full Year Fiscal 2021. [Operator Instructions] 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, Executive Vice President and Chief Legal Officer 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 part of this call, 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 that our presentation includes some forward-looking statements about Monro’s future performance. Actual results may differ materially from those suggested 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 and include the significant uncertainty relating to the duration and scope of the COVID-19 pandemic and its impact on our customers, executive officers and employees. 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, which are intended to supplement and not to be substitute for comparable GAAP measures. Reconciliations of such supplemental information to the comparable GAAP measures will be included as part of today’s presentation and in our earnings release. Robert Mellor, Monro’s Board Chairman; Mike Broderick, President and Chief Executive Officer; and Brian D’Ambrosia, Chief Financial Officer are joining us today. For the question-and-answer portion of the call, our Chief Operating Officer, Rob Rajkowski, will also be available to take questions. With that, I would like to turn the call over to Rob Mellor. Rob?

Thank you, Maureen and good morning everyone. Today, I am pleased to formally welcome and announce Mike Broderick, our new President and CEO to join Monro at the beginning of April. Mike knows this industry well having spent his entire career in the automotive aftermarket. Over the past two decades, Mike has led the development and the execution of business transformation strategies that have led to profitable growth in the organizations he has served and we could not be more excited to leverage his extensive background and experience to position Monro for greater sustainable growth. I also want to acknowledge our senior leadership team for their great work and incredible partnership throughout my time as interim CEO. During a challenging year, our significant accomplishments were made possible to the strong collaboration of the entire leadership team. Going forward, I will continue to serve as Chairman of the Board and look forward to assisting in a smooth transition. And with that, I’d like to turn the call over to Mike.

Thank you, Rob and good morning everyone. It’s an honor to be here on my first earnings call as Monro’s CEO. Let me start by highlighting some of the reasons why I joined Monro and what I have learned over the past few weeks. Over the years, I have watched with admiration Monro’s remarkable journey in becoming a recognized national chain with coast-to-coast presence and a leading auto service entire brands provider. With a scalable platform, Monro is uniquely positioned to continue to grow and take advantage of an aging vehicle fleet. Since joining Monro 7 weeks ago, I have been thoroughly impressed by the depth of talent across the organization and the commitment of our teammates. I also feel fortunate to be surrounded by an exceptionally strong and experienced senior leadership team. We share an ambition to realize the full potential of our business and take Monro to its next phase of growth together. Turning to Slide 3, I want to take this time to thank the entire Monro team for their great work over the past year. It was certainly an unprecedented year, but Monro has capitalized on opportunities to accelerate the company’s transformation initiatives, including the implementation of several foundational technology tools. At the same time, our team was able to bolster our financial position, while also expanding our presence in the attractive and dynamic Western region. Monro has made remarkable progress in its transformation journey in fiscal 2021 and I believe these accomplishments will be instrumental to our success in the coming year and beyond. With the full support of our Board of Directors, I am committed to ensuring the continuity of Monro’s growth and transformation strategy. My goal is to bring our Monro.Forward initiatives to life in every store, for every guest, and for every teammate. The past few weeks have been truly exciting. I have spent a lot of time visiting stores in different markets and engaging with our teammates in the field. Their feedback has been invaluable in understanding how some of the Monro.Forward initiatives are being executed and ways we can further improve. Our go-forward plan will be grounded in the work that has already been done with a key focus on our customers, teammates and in-store execution. I see tremendous opportunity for value creation through a renewed focus on operational execution and a continued commitment to drive profitable growth and strong cash flow. I will have more to share in the coming quarters, but would like to provide some initial perspectives on my key priorities, as highlighted on Slide 4. First, Monro is a service-oriented organization and my assessment of the business is focused on opportunities to enhance the customer experience and improve in-store execution to achieve long-term organic growth. I want to fully equip our teammates to deliver our best-in-class experience for every guest who comes to Monro. To support our teammates, we will continue to enhance training opportunities and ensure the effective use of digital tools in all of our stores. In addition, I believe the targeted re-image of our stores will continue to complement in-store operational excellence initiatives. Secondly, Monro is well-positioned to take advantage of attractive consolidation opportunities in our fragmented industry and M&A will remain a key pillar of our growth strategy going forward. Our recently completed acquisition of Mountain View in California demonstrates that our scale, customer-centric approach and company values make Monro one of the preferred buyers of family-owned businesses. I had the privilege to meet the Mitchell family and visit some Mountain View stores last month and I am excited by our prospects in this region. Thirdly, we will remain steadfast on driving strong cash flow. The remarkable job of our team, since the beginning of the pandemic, led to record operating cash flows of $185 million in fiscal 2021. Looking ahead, we will focus on implementing operational improvements and optimizing working capital to continue to enhance our cash flow performance. In summary, this is a business that I am passionate about. I feel confident about the opportunities we have in front of us as we enter an exciting inflection point in our transformation. With that, I will now turn the call over to Brian who will provide an overview of Monro’s fourth quarter performance and discuss our outlook. Brian? Brian D’Ambrosia: Thank you, Mike and good morning everyone. I want to start first by echoing Mike’s comments and expressing my gratitude to the entire Monro team for their exceptional hard work over the past year. Now, turning to Slide 5, let me take a few minutes to talk about our solid fourth quarter performance and the positive outlook for our business. Continued strength in tires, our largest category and improvement in our key service categories led to strong performance in the fourth quarter. Sales increased 6.8% year-over-year to $305.5 million, primarily driven by a 9.4% increase in same-store sales. Sales from new stores increased by $5.1 million including $4.6 million from recent acquisitions. This was partially offset by a decrease in sales from closed stores of $5.9 million. The quarter began with positive comparable store sales in January that was followed by some softness in February due to extreme winter weather in our Southern and Mid-Atlantic markets. Demand rebounded sharply in March, with comps up 32% year-over-year. This reflects strengthening traffic as well as easier comparisons due to the COVID-19 related lockdowns that started mid-March last year. For reference, comps were down 20% in March last year. Our strong momentum exiting the year has continued into our fiscal first quarter, with comps up 53% quarter-to-date. This compares to comps in the same period last year of down 34%. We are encouraged to have comparable store sales levels in line with pre-COVID performance. Turning to Slide 6, gross margin decreased 60 basis points to 35.1% in the fourth quarter. Variable gross margin was positively impacted by a 7% increase year-over-year in gross profit per tire, reflecting the benefits of our tire category management and pricing tool. Variable gross margin was also positively impacted by lower technician labor costs as a percentage of sales driven by increased labor productivity during the quarter. In addition, distribution and occupancy costs decreased as a percentage of sales from the prior year as we gained leverage with higher overall sales. These positive trends were more than offset by a higher sales mix of tires compared to service categories. Importantly, we continue to execute disciplined cost control. The year-over-year decrease in operating expenses resulted from our efforts to realign our marketing spend towards higher ROI digital channels and right-sized store management staffing. It also reflects lower expenses from 20 fewer retail stores as well as a $6.6 million impairment charge we took in the prior year period. Higher comparable store sales enabled us to generate increased operating margin against our lower fixed cost structure. Net interest expense for the fourth quarter decreased to $6.7 million as compared to $7.1 million in the same period last year. A decrease in our weighted average interest rate was partially offset by higher average debt outstanding. Income tax expense in the fourth quarter was $2.3 million compared to an income tax benefit of $2.8 million in the prior year period. Net income for the fourth quarter was $11.8 million compared to a net loss of $3.8 million in the prior year period. Diluted earnings per share for the fourth quarter was $0.35 compared to a diluted loss per share of $0.12 in the same period last year. Adjusted diluted earnings per share for the fourth quarter, a non-GAAP measure, was $0.38, which excluded approximately $0.02 per share related to Monro.Forward initiatives and $0.01 per share of costs related to management transition and a distribution center closure. This compares to adjusted diluted earnings per share for the fourth quarter of fiscal 2020 of $0.08, which excluded $0.10 per share of impairment costs related to planned store closures, $0.05 per share of additional store impairment costs, $0.03 per share of costs related to Monro.Forward initiatives, $0.01 per share related to litigation reserves, and $0.01 per share related to our headquarter expansion. As highlighted on Slide 7, we continue to have ample financial flexibility to support our operations and execute our growth strategy. We generated a record of $185 million of cash from operations in fiscal 2021 compared to $121 million for the prior year. We are maintaining our disciplined approach to capital allocation and invested $52 million in capital expenditures, primarily related to our ongoing store re-brand and re-image initiative and investments in technology. We paid $17 million for acquisitions and $33 million in principal for financing leases. We are also maintaining our strong commitment to returning cash to shareholders through our dividend program as evidenced by the 9% increase in the first quarter fiscal 2022 dividend announced today. We distributed $30 million in dividends in fiscal 2021. We were able to reduce our bank debt, net of cash by $61 million during fiscal 2021. At the end of the fourth quarter, we had net bank debt of $160 million and a net bank debt to EBITDA ratio of 1.1x. As of May 15, 2021, we had cash and cash equivalents of $25 million in availability on our revolving credit facility of $356 million. During fiscal 2021, we substantially completed the re-branding or re-imaging of approximately 150 stores. To-date, we have completed the transformation of approximately 360 stores in a number of key markets, including re-branding approximately 115 service stores to tire-branded stores and we continue to see outperformance of our re-branded and re-image stores compared to our chain average. As we enter fiscal 2022, we remain committed to managing our business for maximum cash flow. First, we will continue to make operational enhancements across our business to expand margins. These efforts, combined with top line growth, are expected to drive EBITDA growth and increase cash flow generation. In fiscal 2021, we realized $35 million in cost savings. These cost savings resulted from the optimization of store management staffing and the improvement of our marketing related efficiency and also general overhead cost reductions. In addition, our previously announced store closures benefit our operating income by $3.8 million. In fiscal 2022, we continue to expect $15 million to $20 million in structural cost savings, in addition to $5 million in benefit from store closures, all this compared to fiscal 2020. We also remain focused on working capital improvement and believe we will have additional opportunities in this area. Moving on to Slide 8, I would now like to take a moment to provide an update on our acquisition strategy. We made great strides in solidifying our geographic footprint in the Western region over the past year and most recently completed the acquisition of Mountain View Tire & Service. This acquisition was completed on April 25, 2021 and includes 30 retail stores in the Los Angeles area and is expected to add $45 million in annualized sales. We are particularly excited about our growth prospects in this attractive and dynamic market and are focused on seamlessly integrating the Mountain View acquisition in the first quarter of fiscal 2022. Despite the impact of the COVID-19-related lockdowns, we are pleased with the strong earnings contribution from our previously acquired California, Nevada and Idaho stores this year. Strategically located acquisitions at attractive valuations remain a cornerstone of our growth strategy. We have a robust acquisition pipeline, including over 10 NDAs currently signed for opportunities ranging from 5 stores to 40 stores. We are well positioned to take advantage of the many opportunities for consolidation in our industry. Turning to our outlook, the COVID-19 situation is still fluid, which makes it difficult to accurately forecast the impact of the ongoing pandemic on our future operations. While we are not providing formal fiscal 2022 guidance, we are almost 2 months into the first quarter and have ample reasons to be optimistic. In light of our comparable store sales momentum quarter-to-date, we are on track to achieve double-digit comparable store sales growth in the first quarter. As a reminder, prior year June comps of down 14% are a less favorable comparison than the first year – than the prior first year – excuse me, than the prior year first quarter to-date comps. In addition, prior year second quarter through fourth quarter comps are a less favorable comparison than prior year first quarter comps. As such, we expect comparable store sales growth to moderate as compared to the 53% we achieved in the first quarter to-date. Despite an expected favorable impact of sales mix year-over-year, we also anticipate that our first quarter gross margin performance will reflect the negative impact of a higher sales mix of tires compared to the first quarter of fiscal 2020. Lastly, you will find some financial assumptions for fiscal 2022 on Slide 9 to assist with your modeling. We expect tire and oil costs to increase year-over-year. Regarding capital expenditures, we expect a range of $40 million to $55 million in fiscal 2022, depending on the amount of store refresh activity that we undertake. And with that, I will turn the call back to Mike for some closing remarks. Mike?

Thanks, Brian. And it is important to note that the environment is still very dynamic, and COVID-19 safety concerns remain top of mind for our teammates and customers. That being said we are encouraged by our robust performance in the first fiscal quarter to-date and optimistic about the outlook of our business. We expect vehicles miles driven to normalize as mobility increases and more consumers start to reengage in their daily activities. As we head into the summer driving season, we are already seeing more customers take to the road and higher average ticket trends indicate that they continue to invest in their vehicles. Overall, we remain well positioned to capitalize on the strengthening demand and have the financial flexibility to execute our growth strategy to deliver long-term value for our shareholders. I would now like to provide an update on our corporate responsibility efforts. We view our responsibility to our teammates, customers, the communities in which we operate and doing our part to take care of the environment as not only the right thing to do, but as an integral component of our long-term planning and success. As part of our commitment to transparency and accountability in this area, we look forward to sharing accomplishments and steps being taken in our first corporate responsibility report that will be published next month. I would like to especially recognize the efforts of Maureen Mulholland, our Chief Legal Officer, in taking the lead within the senior leadership team to formalize our strategy and vision, and the Board for its strong support oversight of this important component to our overall business. While Monro has a strong foundation of environmental and social stewardship, I recognize that the journey is ongoing. And I am committed and excited to work with our senior leaders to build on the great work that has been done. With that, I will now turn the call over to the operator for questions.

[Operator Instructions] Our first question today is coming from Jonathan Lamers from BMO Capital Markets. Your line is now live.

Good morning. First for Mike – first for Michael Broderick, so, this is the first opportunity we have had to speak with you. Could you compare Monro to other service businesses you have been involved with? I would be familiar with Canadian Tire, but advance or any others would be great?

Sure. It’s a pleasure to be on the call and to be part of the Monro organization. Just to level set, I have been calling on Monro for over 20 years. So, I am extremely knowledgeable about the people here and also the services that they have performed. Very much so this is a service business differently than the retailers. When I say service business, we are literally working on the customer’s car. And that’s our only job, is working on the customer car. So, all of our categories are very focused on – all our categories, batteries, brakes, under hood around the car. We really are the end of the supply chain and we are essentially the customer of the retailers. So, most of my focus and my equivalent – my understanding is either calling on customers to Monro or actually my Canadian Tire experience. And I would say that we perform as well as any other service provider. It really is a war on talent at the local level where we have great technicians. They perform great work, and they have great stores that satisfy the customers in their local communities. But it’s very different than a retail distribution business, and it’s more consistent with the Firestones and the Canadian Tires of the world.

Great. Thanks. And you mentioned acquisitions as being a key focus for you and a real opportunity for growth. I know that tire distribution market is huge and very fragmented. Are there any parts of the market that seem particularly attractive to you? And how are you thinking about evaluating acquisition opportunities going forward?

That’s – as I stated in my opening comments, M&A is going to be very relevant. We have – we are missing a lot of space out in the Southwest. We don’t have many stores. So in order to fill out, that will be a focus, is the Southwest. But where we have opportunities to fill in, we will. And I also like to introduce the fact that we are going to start looking at greenfields as an opportunity to move faster in the markets that, if we can’t find viable M&A opportunities, we will start building our own stores.

Okay. Look forward to hearing more about that. Maybe a couple of questions for Brian, so, you were down 20 stores since last year at the end of the quarter. Are you continuing to reopen stores into Q1? Brian D’Ambrosia: Yes. It really wasn’t related to any temporary closures or re-openings. If you remember, we did not close any stores during the pandemic. We significantly reduced hours of operation, consistent with others in the industry. And we have reopened those hours of operation to be comparable to where we were pre-pandemic. So, the net 20 fewer store closures really relate to the 40-plus stores that we closed in Q1 of last year as part of our evaluation of the store portfolio in closing some of those underperforming stores, offset by the Allen Tire acquisition that we closed on last quarter.

Okay. So just to be clear, do you believe that if demand returns to fiscal 2020 levels that you would be able to service the same level of sales from the reduced footprint? And will the $15 million to $20 million of OpEx savings be permanent at that sales level? Brian D’Ambrosia: Yes. The $20 million of sales – I am sorry, the 20 not fewer stores that we closed, those – the 40-plus stores are reflected in the $5 million of annual operating income savings that we ascribed to the drag that those stores were providing before we closed them. So, that’s in that number. And our sales in FY ‘21 are reflective of not having those stores in there. Certainly, the $15 million to $20 million that was coming out of those stores of sales is going to be reduced in 2022 compared to 2020 when those stores were in operation. But the profit is an incremental $5 million by not having them. The $15 million to $20 million is really related to the cost savings that we drove in FY ‘21. Some of that, we said it was $35 million of cost savings in 2021. We are adding back about $15 million to $20 million of that in 2022 for a net reduction of 15 to 20 versus the base year, which in this case, would be FY ‘20.

That’s clear. Thanks. And Michael mentioned an improved ability to – well, actually ticket inflation as traffic is returning. Is there any way to estimate how much stimulus checks at the beginning of the quarter would have supported the strong comp you saw and the next round of strong comps you are seeing into the next quarter? Brian D’Ambrosia: To isolate on stimulus is difficult. I think there is a – the consumer has been well supported and continues to be well supported during this. The other probably more sustainable improvement that we continue to see is improvements in vehicle miles traveled. I think that will continue to improve, particularly in light of some of the CDC guidance that was recently released related to mask mandates. So, I think that all of that is really positive, especially as vaccination continues to roll out. So, we look at the vehicle miles travel trend as one that should continue to improve, and that’s the longer-term trend that will provide a nice backdrop for our business, in addition to the aging vehicle cohort, obviously, elevated used car sales that we have seen is supportive of our sweet spot. So all of that, we think, really lines up well from a backdrop and for us to continue to execute our own initiatives to take advantage of that.

I will pass the line. Thanks for your comments.

Thank you.

Thank you. The next question is coming from Brian Nagel from Oppenheimer. Your line is now live.

Hi, good morning. First off, Mike, look forward to working with you. First question I have, maybe a bit of a follow-up to the last question. But you clearly saw a nice sales spike here in the fiscal fourth quarter, a lot going on out there with comparisons, stimulus, etcetera. But as you look at the demand, is there any way to kind of break it apart of how much of that, particularly in the tire category was pent-up versus more demand in real time?

While looking at the tire category, Brian, in particular, we feel really good about our tire category performance throughout the pandemic. We have talked about it on the last couple of calls about our ability to capture increased average selling price, increased margin, all while driving volumes ahead of the tire industry in North America. So, we saw very good demand in tires as we exited Q3 and into January, the plus 3% in January was led by tires, and I think that was probably less affected by some of the stimulus that came out in March. So, that’s a pretty good quarter or a good month in my mind to see where the tire category is at, maybe a little less affected by external factors. And I think it drove a 3% comp versus pre-pandemic levels. So, I think that was a good proof point for us that we are – our business is returning to pre-pandemic levels on a run rate basis, not necessarily due to extreme outside influences. Certainly, stimulus is supportive of some of the outsized performance we saw in April. But we feel good that it’s subsided that our business is still in line with where we were pre-pandemic. Also supporting this is a considerable improvement in our service categories, really leading that plus 53% quarter-to-date. So those categories are leading that number, which we would expect given the step back they took last year during the pandemic. We are not all the way back in those categories to where we were pre-pandemic, but we are getting there. And that certainly is going to help us from a margin standpoint. I think as it relates to margins, we will be better than we were last year on a gross margin line. We won’t probably be back to where we were in FY ‘20, and that’s due to the tire mix of the business that occurred during the pandemic. And we will start to move our way out of that as the service categories really start to contribute here.

That’s really helpful. I appreciate the color there. Follow-up question, just with regard to – and recognizing you are not giving official guidance here, but with regard to the commentary around fiscal Q1, so as you said in your deck, I mean as of mid-May, tracking above 50%. And then I think the kind of the loose guidance or guidelines was double digits. Can you – could you maybe specify more in the double digits as we think about what type of fade we should expect from that 50%, 53% that you saw as of mid-May?

Yes. Sure. So if you look at the 53% up against the down 30% in the same period last year, that puts us roughly kind of in line with where we were running back in FY ‘20. And so if you look at the June number of down 14, we would expect that we would perform against that number to keep us in line with where we were in FY ‘20. So it means that the year-over-year comp starts to fade. But the net of the 2-year stack in terms of dollars keeps us in line with FY ‘20.

Got it. Appreciate it. Thank you.

Thanks, Brian.

Thank you. The next question is coming from Bret Jordan from Jefferies. Your line is now live.

Hi, good morning, guys.

Good morning, Bret.

Good morning, Bret.

Hey, Brian, just for housekeeping to get started. Did you give the February month comp? I think we have plus 3 in January, and I believe you said March was plus 32. But could we get the February? Brian D’Ambrosia: Yes. Yes, February was down 2%.

Okay. Great. And then a question on the greenfield that you brought up. I think if we go back 10 or 15 years, there used to be a lot of talk about how buying existing units as either a discount to asset value or as a percentage of revenues was attractive. Do you see a different economics in greenfield development? Is it more expensive to build sort of a ground-up store? And is that offset maybe by the traffic you can pickup in these new markets?

Well, I mentioned that – Hi, Bret, good morning. If we can’t find M&A activity that’s actually affordable, then we would be looking to fill out our footprint across the nation. There is a lot of reasons for it. I mean we have a national warranty. We want to stay convenient to our customers. So where we can’t find M&A, we would look at it. Now looking at the financials, obviously, we’re going to be stewards of the P&L and we’re going to be putting stores where we can get the best return for their investment. And we do see a lot of – when you look at the Southwest, there seems to be some open space for us to efficiently do greenfield.

Okay, great. And then a question, I guess, you talked a bit about the margin impact from tires. And have there been any movement in tire pricing on a like-for-like basis or is this just purely driven by mix?

We’ve seen our ability to win on – through optimization of price with our category management tool. And I would say that there is been – that real price has been price increase and price decrease because we are really using that tool to optimize our price levels to optimize that mix to make sure we have the right step-ups and that we’re sharp on price on those tire sizes and applications that are most shopped and that we are able to price in the corners for those that are converted in stores and are less price sensitive. So it’s both. We have seen some price – some cost increases from the tire manufacturers, as you know, breath that they have announced. And that will continue to, we think, increase price at – to the consumer across all price points.

Okay, great. And then the last question, I guess, on regional performance. Any big spreads between the Southern, Northeast, Mid-Atlantic and Western markets?

It was really a pretty even bag in the quarter. As we got into April and into May, the Northeast really started to outperform, but that’s largely because they had the easiest comparison to prior year as they lockdown quicker than the rest of the country.

Okay, great. Thanks a lot, guys. Nice to meet you, Mike.

Likewise. Thank you.

Thank you. Our next question is coming from Rick Nelson from Stephens. Your line is now live.

Thanks and welcome to Monro, Mike. Nice to meet you virtually. So question about the strategy here, it sounds like you’re going to follow the Monro.Forward plan. Curious if there is any tweaks? How you see to that plan? And you mentioned digital initiatives. Curious if you’re going to move toward online tire sales and installers?

Thanks, Rick, for the question. I will take it. When you look at Monro.Forward, the strategy literally touched every aspect of retail. And there was a journey that we were on. And by just good retail hygiene, we actually literally put things in place. When you look at the people part of retail, we introduced new staffing and payroll management system and training. When we talked about product, we talked about category management, assortment of tires and pricing. We’re going to continue to evolve that into service categories. When we talked about promotion, as you illustrated, how do we drive additional foot traffic and our connection to the customer? We are really relying on very efficient marketing mechanisms, and digital is top of mind. And our customers are going online to check prices, check availability, make appointments, and the convenience of our digital experience is paramount. And then on top of it, when you look at Monro.Forward, we added technology at our store level. We revamped our phone systems. And last but not least, and something we talked about, is the re-branding and the re-imaging of our stores. So when you talk about all five of the things I just mentioned, my job right now, it’s really bringing these puzzle pieces together so that we can actually get – maximize the profitability from these investments. It’s all about execution at this point in time. The strategy is sound. The execution is really what’s going to separate us from being successful or not.

Thank you for that. Also curious, in terms of acquisitions, if you could speak to the competitive environment there and the multiples that you’re looking to pay maybe Mountain View is a good example? And do you plan to re-brand those stores? Brian D’Ambrosia: I’ll take that one, Rick. The multiples, as we’ve talked on the last couple of calls, have been largely in line with what we paid historically. We don’t quote them specifically for competitive reasons, but we do feel like those have been pretty much in line in the acquisitions that we bolted on to our initial certified deal out in California and in the West Coast have been in line with our expectations out there of what we paid originally in a certified deal. As it relates to the second part of your question, could you just repeat the second part of your question, Rick?

Do you plan to re-brand the Mountain View stores and I guess the timeline? Brian D’Ambrosia: That’s right. We are looking at the brand portfolio. We’ve obviously acquired the Mountain View brand, which is a strong brand out there. So we will look at the role that, that brand is going to play in the West Coast. We have the tire choice out there currently which is what we’ve re-branded some of our previous acquisitions with. We have Allen Tire out there right now that we acquired that we will determine both that and the Mountain View brand in terms of what its role will be in our West Coast portfolio.

Great. Thanks and good luck.

Thanks, Rick.

Thanks. Our next question today is coming from Stephanie Benjamin from Truist. Your line is now live.

Hi, good morning. Nice to meet you, Mike over the phone.

Thank you, Stephanie. Nice meeting you virtually.

I wanted to touch a bit on the inflationary environment. In couple of questions ago, you talked a bit about what you’re seeing this with tires, but I’d love for you to discuss a little bit more just on base oil and any other commodity inflationary pressures you might be seeing? And then also, more importantly, on labor, just what you are having to do to attract technician talent? If anything, how easy it is for to find technicians as you are reopening – as your stores are reopening? You’re seeing higher demand levels? Are you having to implement wage increases just overall on the cost side of the operations? Thank you. Brian D’Ambrosia: Yes. Stephanie, this is Brian. I’ll take that to start with, and then let Mike add any color since I made the comment about the tires. And so we’ve seen that on the tire side. On the parts side, we haven’t really seen much there to begin – to start with here. But obviously, everything that you see, we see and there are expectations that, that will start and has the potential to start to build in. Now we are a large buyer of those categories, and we have significant scale. And we feel that no matter the environment, we will buy better than our smaller competitors, and that will provide us with a cost advantage. And ultimately, any of the inflationary pressures that the materials would put on the P&L will ultimately be able, because of our industry, be able to be passed on to the consumer. And we feel good about that if we’re buying better and the market is moving up that we will be able to support our margins during that inflationary period. I would say, related to labor, Mike used the words were on talent earlier, and I think that’s really what it is. And we continue to understand what we need to do to be competitive to make sure we’ve got the right people in our stores. So I’ll pass to Mike for additional color.

Stephanie, it’s not by coincidence that when I talk about Monro.Forward, our strategy, it starts with people. It’s – the good news is we’re able to pass along wage inflation into our labor rate. But there really is how do we become a best-in-class employer? And that is everything that we’re trying to do right now with our incredible focus on training, our capacity planning, really making it easier for our teammates to do their job I think these are the things that people – as people come back to work and as our employees are looking to stay with making decisions around their careers, that’s what they are looking for from an employer, and that’s what I’m focusing on.

Great. Really helpful there. And then I guess as the follow-up question. I think we’ve seen some good success from just the pricing tool that was implemented across tire. I’d love to hear, as we kind of think through fiscal 2022 and this return to normalcy, what we have in store in terms of other initiatives, whether it’s along the good, better, best pricing strategy or maybe just dig in a little bit deeper as you kind of move forward. With Monro.Forward, you obviously commented on the continuation of the store refreshes, but what else should we expect as we kind of look through the next year?

So this is – I’ll take it. This is Mike. We made two significant acquisitions out-west. We need to invest and bring them – use the – what we’ve learned in our Monro.Forward and invest and bring both Mountain View and Allen Tires. Basically customer and teammate focused and invest in those stores so that we can finish the acquisition. That’s number one. Number two is what we’ve learned in our category management tool for tires, that’s best-in-class. I’ve been doing this for a long time, applying the learnings that we had with tires and now moving into the service categories and introducing just traditional category management, partnering with our suppliers and really making ourselves relevant to our customers and offering our teammates, giving them an opportunity to offer to our customers’ choices. So it’s easier for them to close the sale. But very much – going back to the Monro.Forward, the work that we’ve done with tires is just – it gives me a lot of confidence that we can do that across the service categories.

Got it. Thank you so much.

Thank you.

Thank you. We reached the end of our question-and-answer session. I’d like to turn the floor back over to management for any further or closing comments.

Thank you for joining us today. This is an exciting time to be part of Monro. We have a strong foundation to build upon to create long-term value for our stakeholders. I look forward to updating you on the progress in the future and getting to know all of you in the weeks and months ahead. Have a great day.

Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.