Good morning, ladies and gentlemen, and welcome to the Monro, Inc.'s Earnings Conference Call for the Third Quarter Fiscal 2020. As a reminder, this conference 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. Thank you. 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 the call this morning, we will be referencing a presentation that is available on the investor section of our website at corporate.monro.com/investors/investors resources. If I could draw your attention to the Safe Harbor statement on Slide 2 of the presentation, I'd 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 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. 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 statements include a discussion of certain non-GAAP financial measures, which are intended to supplement and not be substitutes 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. With that, I'd 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. I'll get started today with a brief overview of our third quarter results, followed by an update on the progress we've made on our Monroe Forward strategy. As illustrated on Slide 3, we reported comparable store sales down 0.9% in the third quarter as higher year-over-year ticket was offset by negative traffic. In October and the beginning of November, we performed well against difficult comparisons in the prior year. Mild weather conditions towards the end of November and in December caused a slowdown across our core northern markets. These conditions have continued into January, with our comparable store sales down 4% during the month. We do not like talking about the weather; however, it is impossible to ignore the impact it has on our business. While we are not satisfied with our financial results this quarter, we are executing well against the areas within our control. In particular, we continue to move deeper into our company transformation and are confident we are on the right path. We are committed to making the necessary changes across the organization to position us to deliver strong results, no matter the external circumstances. Moving on to our performance by category in the third quarter, we were down 1% year-over-year in tire comparable store sales as higher ticket year-over-year was offset by a decline in tire volume. We experienced more normalized retail pricing this quarter and are focused on further refining our tire strategy to drive strength in our largest category. Importantly, we're on track to roll out our tire category management and pricing system beginning in the first quarter of fiscal 2021, which will enable a more dynamic and sophisticated approach to real-time pricing. I'll provide more details on this shortly. Turning to our service and repair categories, we saw a 3% decline in brakes year-over-year, falling short of a difficult comparison in the third quarter last year. In maintenance, we were flat, while front-end shocks were down 1% and alignments declined 3% year-over-year. Overall, our southern markets outperformed our northern markets as expected, given the mild winter weather conditions we faced in this region. New stores added $22.7 million in revenue during the quarter, including $20.7 million from recent acquisitions. Regarding our gross margin performance during the quarter, we saw a decline of 20 basis points compared to the prior-year period, primarily driven by the decrease in our comparable store sales, which resulted in higher fixed costs as a percentage of sales. Our variable margin, on the other hand, expanded due to lower year-over-year material costs as a percentage of sales. While slightly higher than the prior-year quarter, technician labor as a percentage of sales decreased sequentially from last quarter. This is a good example of us executing well against the areas within our control. We identified issues last quarter that arose from our transformation and took corrective action to drive improved results. We will have additional opportunities to continue to improve results in this area as we implement our cloud-based storage staffing and scheduling now towards the end of this fiscal year, which will be critical for us to seamlessly adjust the changes in demand dynamics without sacrificing sales. I'd now like to turn to the progress we've made on the Monroe Forward strategy. Beginning with our store rebrand and reimage initiative on Slide 4, this initiative focused on creating a more consistent store appearance while also implementing standardized in-store operating procedures, which we call our Monroe playbook. Additionally, we are rebranding select stores to a tire-oriented banner where targeted demographics favor this type of store format in order to increase tire sales without sacrificing service revenues. During the first half of fiscal 2020, we finalized the transformations of our first group of stores, which includes 44 locations in Rochester, New York, and at Mid-Atlantic, as well as the second group, which includes 43 stores in our southern market. During the third quarter, we continued to scale this initiative across our base and move forward with the transformation of 74 stores in four markets and 42 of our recently acquired California stores. We have completed the transformation of the 74 stores and have substantially completed our California stores, which are being rebranded under our Tire Choice Auto Service Centers banner to drive higher awareness for tires. Turning to Slide 5, I'd like to provide some additional context regarding our strategic rationale as we transform our store base. As many of you know, we operate in two store formats: our service brand stores, which generate approximately $600,000 per store in annualized sales, and our tire brand stores, which generate approximately $1.2 million per store in annualized sales. Prior to any rebrand activity, we operated 555 service brand stores and 734 tire brand stores. As we work to create a nationwide chain of consistently operated stores, we are prioritizing the higher-volume tire brand. Throughout this process, we will be consolidating our regional brands, focusing on shifting our service brands over to the tire brand. The lower number of brands will also allow us to improve our marketing productivity. When we speak to reimage stores, this primarily means modernizing the appearance of our stores with no associated brand change. As we are making decisions regarding rebranding versus reimaging stores, we are leveraging our analytical model as well as taking into account brand equity in that market. Looking at the bottom left of the slide, you can see here the progress we have made so far. We are very much in the early innings of this transformation, with 203 stores substantially completed out of our portfolio. We separate these stores out between comp stores and non-comp stores, which helps us evaluate their performance post-refresh. Of our approximately 900 comp stores that we set out to transform, we've completed 134 stores, and of approximately 159 non-comp stores, we have substantially completed 69. As we move forward with expanding this program across our base, we will continue to prioritize markets that we expect will drive the largest benefit to our sales performance, and our approach will be measured in order to keep sales disruption to a minimum. To the end of this fiscal year, we're focusing on finalizing the transformation of our recently acquired California stores while starting the transformation of approximately 80 more stores that will be completed in Q1 of FY ‘21. Moving on to the performance of the stores we've completed so far to help provide some additional granularity, we separated out how rebranded stores have performed versus the stores that have just been reimaged. Importantly, this data only includes comp stores that had a full quarter of performance following the completion of their transformation. This is how we will speak to the performance of our transformed stores moving forward. As you can see, and in line with our expectations, we see a significant increase in sales when we rebrand stores. This shift optimizes our brand awareness and increases our tire sales without sacrificing our service revenues. The stores that have been reimaged were slightly down, as these are located in our northern markets, which were impacted by the mild weather conditions I mentioned earlier. We believe this performance clearly highlights the strong opportunity we have and the benefits that come with a streamlined brand portfolio. The 74 stores that we recently completed are not included in this calculation, given they have not had a full quarter post-transformation yet. But we're seeing early signs of strength with these stores and are pleased with the results. While we still have a while to go to roll this program out to our tire base, the sustained performance we've seen at the stores that have completed the transformation today underscores the impact of this important initiative. Turning to Slide 6 and the remainder of our Monroe Forward initiatives, I'd like to focus my discussion on the initiatives that are top priority, which we believe will be critical to supporting our broader strategy. In the third quarter, we began modernizing our store IT infrastructure at all of our approximately 1,300 locations. This new infrastructure enables state-of-the-art technology, including our new digital phone and texting system, which is a major step towards improving the overall customer experience. This system will allow us to better track customer execution, right, and a more consistent phone strategy and improve conversion. Our store infrastructure modernization will be completed by the end of the first quarter of fiscal 2021, allowing us to leverage our new phone system, which will be critical to driving traffic to our stores. Another priority for us is the optimization of our entire category management. We are on track, and by the end of this fiscal year, we expect our new pricing software will be operational. We believe this will be critical to driving long-term margin expansion by providing improved visibility into demand dynamics, allowing us to better refine our assortment and execute our strategy to become the number one destination for tires at any price point. Finally, we are right on track to roll out our cloud-based store scheduling model pilots by year-end. Gaining real-time visibility into our labor models via the cloud will help us be more effective and strategic, ensuring we are not understaffed and losing sales or overstaffed when there is a lack of demand. Regarding our other two main initiatives, we have rolled out the Monroe University program to all of our teammates and we have continued to expand and enhance the course content. We've also implemented mandatory onboard training to ensure that everyone who joins our team is trained on our Monroe playbook operating procedures in order to provide a quality five-star experience to our customers. Moving on to Slide 7, while we are very focused on the rollout of Monroe Forward, acquisitions remain a cornerstone of our growth strategy. During the quarter, we closed the previously announced acquisition of three companies, one with 14 locations in Las Vegas, Nevada, and four in Boise, Idaho, as well as two companies that include nine stores in Northern California, further solidifying our growing position in the Western United States. Our presence in this region allows us to better service national accounts, as well as benefit from the high concentration of vehicles in this market and a potential long-term consumer shift to rideshare. The acquisition in Nevada and Idaho, which are new states to Monro, is expected to add approximately $20 million in annualized sales, representing a sales mix of 75% service and 25% tires. The acquisitions in California are expected to add approximately $25 million in annualized sales, representing a sales mix of 55% service and 45% tires. These acquisitions are expected to be dilutive to earnings per diluted share in fiscal 2020. Overall, acquisitions announced and closed in fiscal 2020 collectively represent an expected $120 million in annualized sales. We operate in a very fragmented industry with significant opportunities for further consolidation, and we believe we are well-positioned to continue to execute on our robust pipeline of attractive M&A targets. We currently have over 10 NDA signed with opportunities ranging from five to 40 stores, which we believe will allow us to maintain our leadership position in the markets we serve while continuing to expand our geographic footprint into attractive and underserved regions. Furthermore, by continuing to execute our Monroe Forward initiatives, including our new brand standards and operating procedures, we expect to integrate our new acquisitions more effectively and efficiently. Lastly, we opened one Greenfield location during the third quarter, bringing our total Greenfield store openings to seven in fiscal 2020. In conclusion, we are confident we are on the right track to drive future success in our business. We are in the early innings of a significant company transformation that will result in a platform capable of delivering sustainable, long-term growth. We are not there yet, nor do we expect our results to be linear as we move through the transformation. We are committed to driving the necessary changes to improve our business, making the appropriate course corrections when necessary, and executing well against the areas within our control. I'd like to thank the entire team at Monro for their exceptional work as we execute this strategy, as well as our customers and shareholders for their continued support. With that, I'll turn the call over to our Executive Vice President, Chief Financial Officer and Treasurer, Brian D'Ambrosia, who will provide additional detail on our third quarter financial performance and fiscal 2020 outlook.

Thank you, Brett, and good morning, everyone. Turning to Slide 8 and our performance during the quarter, sales increased 6.2% year-over-year to $329.3 million, driven by sales from new stores of $22.7 million, including $20.7 million from recent acquisitions, partially offset by a decrease in sales from closed stores of approximately $0.8 million. Same-store sales in the quarter were down 0.9% year-over-year. The third quarter of fiscal 2020 had 89 selling days, in line with the previous year period. Gross margin decreased 20 basis points to 37.8% in the third quarter of fiscal 2020 from 38% in the prior year period. This decrease was partially due to an increase in distribution and occupancy costs as a percentage of sales, as we lost leverage on these largely fixed costs with lower comparable store sales. However, as Brett mentioned, we saw improvements in our variable margin driven by lower material costs as a percentage of sales. Operating expenses for the quarter increased $5.5 million to $92.8 million, or 28.2% of sales, as compared with $87.3 million, or 28.1% of sales for the prior year period. The year-over-year dollar increase includes expenses from 103 net new stores. Our operating income for the third quarter was $31.6 million, which increased by 2.8% as compared to operating income of $30.7 million for the same quarter last year, and decreased as a percentage of sales from 9.9% to 9.6%. Net interest expense for the third quarter increased $0.2 million to $7 million as compared to $6.8 million in the same period last year. The weighted average debt outstanding for the third quarter of fiscal 2020 increased by approximately $112 million as compared to the prior year period. The increase is primarily related to an increase in financing lease debt recorded in connection with our fiscal 2020 acquisitions and Greenfield expansion, as well as an increase in debt outstanding under our revolving credit facility to fund the purchase of our acquisition. The weighted average interest rate for the third quarter decreased by approximately 140 basis points year-over-year due to lower LIBOR and prime interest rates, as well as lower borrowing rates associated with new leases. Our effective tax rate was 24.1% for the third quarter, compared to 15.3% for the same period last year. The year-over-year increase is primarily due to a one-time income tax benefit adjustment we realized in the prior year related to a retroactive accounting method change, which was related to certain deductions that the IRS accepted during the examination of our fiscal 2016 and fiscal 2017 tax return. Net income for the third quarter was $18.9 million compared to $20.5 million in the prior year period. Diluted earnings per share for the third quarter of fiscal 2020 were $0.56 compared to diluted earnings per share of $0.61 in the third quarter of fiscal 2019. Adjusted diluted earnings per share, which is a non-GAAP measure for the third quarter of fiscal 2020 was $0.60, which excludes from diluted earnings per share $0.03 of costs related to Monroe Forward initiatives and $0.01 of costs related to acquisition due diligence and integration. This compares to adjusted diluted earnings per share of $0.57 in the third quarter of fiscal 2019, which excluded $0.01 of costs related to Monroe Forward initiatives, $0.01 of non-recurring corporate and field management realignment costs, and $0.06 benefit from the one-time income tax adjustment. For more information on this non-GAAP measure, please see the reconciliation of adjusted diluted earnings per share to diluted earnings per share in our earnings release. Lastly, we opened one Greenfield location during the third quarter. As a reminder, Greenfield stores include new construction, as well as the acquisition of one to four store operations. Greenfield locations on average are expected to add approximately $1 million each in annual sales. As of December 28, 2019, the company had 1,289 company-operated stores and 99 franchise locations, as compared with 1,186 company-operated stores and 99 franchise locations as of December 29, 2018. During the third quarter, we added 27 company-operated stores and closed none. Turning to Slide 9, we continue to maintain our disciplined approach to capital allocation as we execute our growth strategy. Our capital expenditures were $42.2 million in the first nine months of fiscal 2020, of which approximately $18 million was related to investments in our Monroe Forward initiative. We are pleased with the progress of our Monroe Forward strategy and we continue to expect an incremental $75 million in capital expenditures above our normal run rate over five years to support investments in-store image and technology. Additionally, accretive acquisitions support our growth strategy. During the first nine months of the year, we spent approximately $104 million on acquisitions, including one to four store acquisitions completed as part of our Greenfield expansion strategy. As Brett mentioned, acquisitions announced and completed in fiscal 2020 collectively represent an expected $120 million in annualized sales. I'd like to provide some additional clarity here. The $120 million in sales represents the expected run rate for these stores once they have been fully integrated, which as we've stated in the past is usually in year three post-acquisition. During years one and two following the acquisition, we typically see a step down in sales given the process of onboarding new stores to our model. Moving on, we continue to be committed to returning capital to our shareholders through our dividend program and paid approximately $22 million in dividends in the first nine months of fiscal 2020. Finally, we remain focused on maintaining a solid balance sheet with ample flexibility to support our strategic growth initiatives. We entered the third quarter with strong leverage ratios and have ample room under our financial covenants. We generated approximately $125 million of cash flow from operating activities during the first nine months of fiscal 2020, and debt under our revolving credit facility increased by approximately $59 million. Now turning to our outlook for fiscal 2020 on Slide 10. We have updated our fiscal 2020 comparable store sales guidance range to a decrease of 1% to flat to reflect the impact of our year-to-date performance. Based on the updated comparable store sales guidance and the contribution from recently closed acquisitions, we now anticipate fiscal 2020 sales to be in the range of $1.275 billion to $1.290 billion, an increase of 6.2% to 7.5% as compared to fiscal 2019 sales. This compares to the previous sales guidance range of $1.295 billion to $1.315 billion. Our guidance assumes relatively stable overall tire and oil costs for the balance of fiscal 2020. Given the impact of our year-to-date performance, we expect fiscal 2020 earnings per diluted share to be in the range of $2.25 to $2.35, representing a decline of 5.1% to 0.8% year-over-year compared to $2.37 in fiscal 2019. This compares to the previous guidance of $2.45 to $2.55. On an adjusted basis, which is a non-GAAP measure, the company expects diluted earnings per share to be in the range of $2.35 to $2.45, representing a decline of 1.7% to growth of 2.5%, which excludes from diluted earnings per share Monroe Forward initiative costs and acquisition due diligence and integration costs. This compares to adjusted diluted earnings per share of $2.39 in fiscal 2019, which excluded Monroe Forward initiative costs, nonrecurring corporate and field management realignment costs, acquisition due diligence and integration costs, and the benefit from the one-time income tax adjustment. Acquisitions announced and completed in fiscal 2020 are expected to be dilutive to earnings per diluted share during the year. At the midpoint of our guidance range, we expect an operating margin of approximately 10.2%, interest expense to be approximately $29 million, depreciation and amortization to be approximately $65 million, and EBITDA to be approximately $196 million. We expect capital expenditures to be approximately $60 million this year. This guidance reflects an effective tax rate of approximately 23.5% and is based on 34 million diluted weighted average shares outstanding. As always, our guidance does not assume any future acquisitions or Greenfield store openings.

Thanks, Brian. We are making solid strides in the execution of our Monroe Forward strategy, in particular our store rebrand and reimage initiative. The strong results of the locations that have completed this transformation underscore our confidence in this initiative. The store rebrand and reimage program is further supported by our technological investments, which we believe will help drive long-term margin expansion. In summary, we remain committed to driving the necessary changes to improve our business, making the appropriate course corrections when necessary, and executing well against the areas within our control. We are excited about our future and look forward to capitalizing on the attractive opportunities ahead. With that, I will now turn the call over to the operator for questions.

Our first question is from Brian Nagel of Oppenheimer. Please go ahead.

So I want to focus. I apologize for focusing on the weather here. But I do just want to dive a little deeper into sales trends in the quarter. So Brett, you mentioned, I think Brian, that you did too in your prepared comments just you made some commentary suggesting that to the degree to which weather impacted the business. I was wondering if you can drill down a little further and say what that negative 0.9% comp would have been had the weather cooperated? And some of the other metrics you're seeing that really suggests the underlying business is trending better than what we saw in the weather-affected fiscal Q3?

Yes, I'll take the first part and I'll let Brian take the second part of the question. When we look at the performance in the quarter, as we talked about, our northern markets certainly underperformed the southern markets. To give you a little more granularity on that, certainly our stores up in the Northeast and the Midwest were where you would expect to have more exposure to weather conditions. Like you have in the Northeast, they certainly underperformed. I think it's difficult to say what we would have done. Certainly, I think we're expecting positive comps in the quarter. Our internal expectations would have been closer to plus one to plus one and a half, assuming normalized weather conditions that we have seen in the past. We felt really good coming out of October and November given the strength of last year's performance that we are comping against. And we didn't get the cooperation from the weather in December that we were certainly expecting. Because I think the comments in my prepared remarks were we certainly don't like talking about the weather, Brian, but we can't ignore the fact that when 50% of our business is tires, and we have a high concentration of stores in the Northeast and Midwest, we are going to have outsized exposure to our comp performance. Brian, would you mind restating the second part of your question?

Well, I think - look I think you covered it right, maybe I'll just bounce a follow-up question if I could. So the guidance - the adjusted guidance and you mentioned so in January you were - did I think a negative four. Now, if I'm doing the math, it looks as though that the adjusted guidance would suggest some type of pickup then in business in February and March. I guess the first question is that assumption correct? And then the follow-on question is I know we've seen this before with your business but at what point does because we still have a lot - we have potentially a long time in the winter. The weather could still come but is there a point at which in the quarter where the weather just comes too late?

Yes. So Brian, your assumption is correct. Regarding the implied comps. So if you think about Q4, at the midpoint of let's say down 0.5 for the full year down 0.5%, that implies Q4 of down 2%, which would be about February and March being down 1% in order to get to that down 2%. So that's the dynamic at the midpoint. So there is an expectation of a pickup in February and March.

And Brian, maybe just to comment on the second part. As we get deeper into the fourth quarter, our fourth quarter and the second half of the quarter in particular, I think we become less sensitive to the weather as you transition out of say pure winter conditions into spring. Certainly, I think the later in the quarter you get snowfall, certainly doesn't have the same impact on tire demand but you would find in our business that we got snowfall in October or November. Consumers are pretty tricky with their money. I believe you get snowfall late in the season. They tend to forego that purchase and push it out until next season in particular. The other thing to call out as well is, if you look at our historic performance at the company, December and January have always been the most volatile months that we had to contend with. We have seen past performance trends coming out of December and January don't necessarily reflect what you see in the spring months. Given the mild December and January heading into the balance of the quarter, we feel pretty good about the guidance range that we provided. As Brian said, our midpoint assumes that on the low end of our comp sales guidance that assumes run rate coming out of January, which we certainly believe we're going to be better than that as we roll into FY '21.

Our next question is coming from Jonathan Lamers of BMO Capital Markets.

Brett, looking at your slide on the store rebranding, the 18% performance of the rebranded stores I think is good. I'm curious from your analytics model how many years should it take a rebranded store to reach projected run rate sales?

So if you look at the top quadrant of that slide, Jonathan, we've shared with investors the fact that our service stores do roughly $600,000 in revenue and our tire stores do $1.2 billion. So in the case where we're rebranding the service store, you're working off a base on average of $600,000, and we've seen, I'll call it double-digit comp improvement off of that base, you can get to an implied number certainly on how fast or how long it would take to ramp to the full maturity equaling the average sales performance of our tire branded stores. One of the things that's encouraging about the strategy for us is not that it's just a one-time step-up in sales. This creates the opportunity for multiple years of sustainable growth as our brand and our positioning, our brand-related tires start to mature. Keep in mind the tire purchase cycle with consumers is anywhere from two to four years. So if we rebrand right before a consumer made that decision to buy tires, we won't be relevant to that consumer for two to three years out. So to put that in a timeline that you're looking at three to five years to certainly mature out to average sales performance of the tire branded store.

So just to circle up on that for the stores where you're rebranding. There's nothing about their market. Like you would expect that those stores would have sales comparable to your existing tire brand stores of the $1.2 million, is that correct?

Yes, as a general statement, that's correct. I think certainly you're going to have markets that will exceed the average, and you'll have some markets that will be lower than that. That's part of the choices that we make in the analytic model. But on average, as we look across our, I'll say, the opportunity stores that be in the 555, I think we feel very comfortable on average that we can reach the full potential of the $1.2 over time as they mature.

Switching gears, Brian, how much of a headwind to that revenue from acquisitions were the conversions of the 42 California stores this quarter?

Yes. I mean we had some disruption there. I would say we haven't really quantified that from a sales standpoint. But that's a great point, Jonathan, in that we have immediately put the new stores that we acquire on the Monroe playbook, and then shortly thereafter, in this case about six months, get the reimage in-store brand standards in place. So in Q3, the 42 California stores went through that. They're substantially through that as of the end of Q3. But we haven't quantified it, but it certainly had some impact on their sales performance in the quarter.

And that $1.8 million charge from Monroe Forward initiative this quarter, what was that for?

Yes, it was all related to the store rebrand and reimage. It falls into three primary buckets related to that. The first is non-capital items that we send to the stores. So as we think about updated safety chains, updated day banners, updated point of sale marketing materials, all of these things to get the store initially to the standard that are not capital, in terms of the actual work and construction done on the store that's the first bucket. The second bucket is non-capital work that's actually done. We get into these stores and we identify non-capital repairs, demolition, as well as some of the fixed vs. replace items. For example, stripping a floor and redoing a floor versus installing a new floor. Those are things that make sense economically, but you get different treatment from expense versus capital for. So that's the second bucket. And the third is just write-off of existing lease holes in the stores, anything from counters to maybe some existing signage that was put off as part of an acquisition when we initially branded the stores over to a Monroe brand. Those are the three primary buckets that the Monroe Forward initiative costs consist of.

Our next question is coming from Bret Jordan of Jefferies. Please go ahead.

Back to Slide 5. I guess if we look at the 18% growth in rebranded stores, if we really so look at the comparable growth there, ex the new product lines you're adding, how is the service comp against the service comp in those stores? Are you seeing a pickup as you changed the brand?

Yes, maybe just to clarify though, Bret, I think we're actually not adding any new products to the service menu.

Right, but you're adding tires to the stores, right?

Yes, just mix, right. Even our service stores, they sell tires, it's only 15% of their mix. So we're certainly seeing growth, more outsized growth in their tire sales and we've had success in maintaining the rate of growth that we've seen on the service side, which has been part of our thesis is to hold on to the service business that we've enjoyed that's high margin, and then add to that more relevancy to the marketplace on tires and drive the growth through the tire category. We're seeing growth on both sides.

And I guess we look at the reimage, how does that compare to comparable service stores in the network that hadn't been reimaged? I guess sort of looking at it again sort of apples-to-apples against the old stores?

Yes, I think if you can figure out what stores we're talking about there, the 30 stores in Rochester.

Yes.

I think the Rochester stores certainly have been performing quite well relative to what our expectations were on reimage. We certainly didn't expect to see double-digit growth rates out of our reimaged stores. But we were seeing more positive growth out of the stores up until the last quarter, given the exposure that we've had to the weather in the north. Compared to other stores, we're still pleased with what we're seeing from a customer service point of view and from a comp sales point of view relative to their peers, facing a similar, I would say market backdrop from a weather point of view.

Could you give us, I guess, sort of the bit of spread between the southern store comp and the northern store comp? How big of a delta was it?

I mean, it was a couple of hundred basis points of performance.

And I guess for housekeeping, could you give us the monthly?

Yes, so we were down 1.2 in October, down 1.7 in November, and up 0.4 in December.

And then one just, this is sorry, add the questions. On the supply chain side, I mean just to throw the virus into it since that's popular these days, you guys do a lot of direct sourcing the white box product out of China. Do you see any impact on supply chain from what's going on?

We haven't seen any to this point, Bret. We're obviously working through contingency plans which we had to develop actually related to the tariff issue. So we feel pretty confident that through the network of multiple supply points that we'll be able to overcome any particular issues coming from the virus.

Our next question is coming from Rick Nelson of Stephens. Please go ahead.

To follow-up on the weather last year, I think December, January, you also pointed to mild winter weather. Do you think this year was incrementally worse than the prior year?

I think if you look at analyst reports that we've seen, talking about, I guess, the impact that the mild winter has had on not only our category but I think other retail. I think the data would indicate that this has been more mild certainly versus last year. I think we look at precipitation, which is very important for us one must know with our tire business, certainly it’s been a much more mild winter this year relative to last year.

Brett, any update on your partnership with Amazon? What you're seeing there on the install side and how you think your tire prices compare to theirs and the tire category overall? I'm curious about what’s happened with units in the period and market share?

Yes, so let's start with units where units were down, the average selling price was up for the quarter. How that compares, we don't have a lot of syndicated data of course we can look to, and we depend upon our channel checks and information from our tire manufacturers that have good visibility across multiple brands. It feels like it is similar to other companies that have exposure to the North, in particular Northeast, to the degree that we do. We feel like we're probably in line with what we picked up through suppliers and others. As it relates to Amazon, I think we're still pleased with our relationship with them as well as other online tire retailers. We will eventually expand the relationship in FY 2021 to include all stores. We talked about last quarter; our priority has been what I mentioned on today's call: completing the tire category management pricing tool as well as the labor scheduling tool that are just for our organization. I think that's a higher priority at this stage than expanding, but we are committed to expanding that relationship going forward. Related to tire pricing, as you know, Rick, the tire category is very complicated. There are over 30,000 SKUs that you need to manage effectively across multiple markets. One of the reasons why we've invested in the tire category management tool is to do a couple of things. One is give us much better visibility into demand dynamics defined by elasticity down to a SKU level. By having that visibility, it's going to create a much more granular approach that we're going to use for pricing. It allows us to price at the SKU level in our industry with the intent being to strike that right balance between driving the right price to drive unit volume while preserving and expanding our tire margins through the right mix at the right price. I'm encouraged we're in pilot form of that now. We will be operational by Q1 of next year fully operational. The rollout of that is pretty small in scale; we control our pricing centrally. A small team of people will be trained up on using that system. But between now and Q1, we’ll be testing in parallel to make certain we're confident with the results that we're seeing from the system.

Our next question is from Stephanie Benjamin of SunTrust Robinson Humphrey. Please go ahead.

I wanted to go back. I know in the prior quarters when you start rolling out some of the store freshes, you called out a hit or headwind to comp during that quarter really just from distraction would make sense as you're in there kind of reworking and revamping the stores. I believe you said it was about a 70 basis point hit last quarter. Could you quantify that this quarter or is there a way for you to kind of break that out or just weather overshadowed that?

Yes, I think we said last quarter, Stephanie, that we, and we walked everyone kind of through the seven-step process and talked about how we were retooling it to take a lot of that work or almost all that work off of the store teams. So we were able to effectively do that in Q3. We didn't expect that we were going to have to talk about a headwind and we really don't have to in terms of disruption related to the store reimage. I think the California stores on the West Coast maybe saw a little bit more in disruption just because we did put a little bit more on them based on their lack of proximity to our core resources that are doing the reimage. But for the 74 comp stores, those were largely, I would say, undisrupted.

And then just as a follow-up, when we look at the tire category in general, what are you seeing from this over an inflationary environment? I know it was inflationary earlier this year, kind of reviewing how you saw during the quarter and your expectations going forward as well?

Yes, Stephanie, when you look at, if you go back to Q2, one of the things we commented on was just we saw some inflationary pricing on, I would say, the top end of the product category with more premium brands. In the first part of the second quarter, we didn't see a lot of movement on the low-end brands, if you see the opening price point brands. We saw that change exiting Q2 and into Q3. I think, as you saw, and we've made these comments in our prepared remarks that we certainly feel better about pricing moving up across all price points. Relative to that point in Q3, I think our expectation for Q4 is a pretty stable environment around pricing. We don't expect meaningful or material changes in the next quarter. I think we're very focused now on optimizing our internal pricing relative to the market, leveraging the category management pricing, as we talked about.

And then, just lastly from me, kind of more high level, as we think through the strategy to expand your tire services, some of those, the mix changes that your service stores. Does that just by nature put you a little bit more susceptible to changes in weather on an annual basis? To your point, you said on this call that it is the tire category that where if it's a more mild weather where you don't really see the volume during that period? So does this mean that in these conversations going forward, weather could have a larger impact or similar to what we saw this year than maybe in prior years? So maybe your thoughts on that, this high level would be great? Thanks so much.

I think strategically I would start with this: our strategy and always, we like the business model at our stores that has a very focused menu that's focused on tires and full service. I think you're not going to see us migrate to a tire-only category as a broad sweeping strategy for all the reasons you just mentioned. We like diversification in the services. We like being very relevant on frequently purchased items like scheduled maintenance for cars and certainly brakes and other undercar services. I think as we increase our total business, certainly we're going to pick up a little more exposure to tires as we convert more stores in the north, I think to do that. However, I think our broader company strategy is to diversify our store footprint more into the South and out West, and certainly in those regions of the country, you don't see the level of volatility that comes with the tire business like you would find in the Northeast and Midwestern markets.

Our next question is coming from Scott Stember of C.L. King. Please go ahead.

Following up on that last question about your high-level thoughts about weather, I know the goal here was with all this heavy lifting that you're doing right now and all these new processes to get to the point where, I guess, we're not talking about weather having worked. Weather does not really derail the quarter from a comp perspective? Could you talk about, I mean just broadly speaking about how long do you think that will take for us to get to that point where weather could be a headwind, but it's not going to be a determinant whether you're positive or negative from a comp standpoint?

Yes, I think, given our exposure to the Northeast, as long as our store concentration is heavy in the Midwest and Northeast, inherent in that is we pick up exposure to weather. Obviously, we don't like to talk about it, Scott, as you said. Our strategy is to diversify the footprint, keeps continuing to grow down South, and that's reflected by our acquisitions. We continue to build out Florida and have expanded now into Louisiana and Tennessee and certainly out West; that reflects our desire to create more or less volatility in our business due to the store footprint. Now, in our core store markets, we don't accept internally the volatility in our business, and we're investing in technology as we talked about to help us better execute in stores through better trained people, executing better on the phones with our phone upgrade that we're currently doing. All of the initiatives under Monroe Forward are designed to drive performance in our stores regardless of weather, but I think will help neutralize some of the impact that we see from the volatility that comes with snow and colder temperatures.

And just a last question, I know that there were certain things like tire just that we'll see an immediate impact from weather, but more on the side of mechanical parts. Typically, you could see an impact from warmer weather or colder weather a few quarters down the road. Is there a chance that we could see an extended negative impact on the mechanical parts side in the next couple of quarters? That's all I have? Thanks.

Yes, thanks, Scott. I think as we commented in the quarter, our brakes were down 3% in the quarter. Certainly, we were up against strong comp from last year, but also I would say we do sell a fair share of brake services through tires. If you take the consumers' tires off their vehicle, it gives you the chance to inspect their wheels, their brakes, and we do see some nice demand for conversion from tires into brakes as a result of that. As it relates to the downstream effect, I think certainly more harsh winters we tend to see gear up things on the vehicles. However, I will say one benefit of having a more mild winter is usually that leads to spring coming sooner. That opens up a window, I think, for an extended spring selling season. So look, we feel like we're well positioned, I think, coming out of the winter, given our strength in how we performed historically in the service categories and given the emphasis that we placed on good, better, best packages in store. I think we feel confident that we'll be well positioned going into the spring selling season.

At this time, I would like to turn the floor back over to management for closing comments.

Thank you for joining us today and for your continued interest and support of Monro. We believe we are well positioned to execute our strategy and drive long-term value for our shareholders. We look forward to updating you on our progress next quarter. Have a great day.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time and have a wonderful day.