Monro Inc (MNRO) Q2 2026 Earnings Report

Revenue and profitability
- Q2 2026 revenue: $288.914 million, down 4.14% YoY and down 4.03% QoQ. YoY decline largely reflects the impact of the store optimization program (closure of 145 underperforming stores in Q1 2026).
- Gross margin: 35.69% in Q2 2026, up 40 bps YoY, driven by lower occupancy costs and favorable mix, partially offset by higher technician labor costs.
- Operating income: $12.75 million, or 4.41% of sales (flat YoY at 4.4% as reported); adjusted operating income: $14.0 million, or 4.8% of sales (vs. 4.2% in 2025 Q2).
- EBITDA: $28.063 million (EBITDA margin 9.71%).
- Net income and EPS: Net income $5.666 million; diluted EPS $0.18; adjusted diluted EPS $0.21 (vs. $0.17 in prior-year Q2).
- Cash flow and liquidity: Net cash provided by operating activities $32.3 million in H1 2026; free cash flow $26.6 million; cash and cash equivalents $10.5 million; net bank debt $50 million; available liquidity ~$410 million under the credit facility; total debt $501.0 million.
- Balance sheet health: Total assets $1.584 billion; total liabilities $982 million; total stockholders’ equity $601.7 million; goodwill and intangible assets $745.5 million; cash and equivalents $10.5 million; working capital dynamics reflected in AP/Inventory ratio of ~186% at 6/30/2025 (end of Q2).
- Capital allocation: Capex of $5.7 million in Q2; planned full-year capex guidance of $25–$35 million; dividends of $17 million paid in H1; ongoing exit of real estate as part of the optimization program.

Key management themes from the earnings call and supporting materials:
- Strategy and growth initiatives: Management emphasized four performance-improvement areas, notably aggressive consumer acquisition via digital marketing and CRM targeting, with refined customer segmentation focusing on higher-value customers who deliver greater gross margin; targeted expansion of digital marketing to ~600 stores by Q3 and full rollout by December. Quote: 'We have now ramped our refined targeting to almost 600 stores, and we are encouraged to see that these stores are outperforming the balance of our store chain on several key metrics' (Peter Fitzsimmons).
- Store operations and experience: Introduced ConfiDrive for digital courtesy inspections, centralizing scheduling via a call center to reduce in-store burden and improve efficiency; rollout expected to all stores by early November. Quote: 'This allows our store managers to focus more of their time on in-store activities without the burden of answering each and every call that comes in.'
- Real estate and cost discipline: Closure of 145 stores completed; exit of 21 leases and sale of 3 owned locations for $5.5 million in Q2; ongoing optimization aimed at driving cash flow and reallocating capital to continuing locations. Quote: 'exit 21 leases and sold 3 owned locations, which resulted in proceeds of $5.5 million.'
- Margin and pricing: Gross margin expansion aided by lower occupancy costs and favorable service mix; tariff and pricing dynamics discussed with vendor support and updated tire assortment strategy; marketing and merchandising enhancements continued to support margin through higher-ticket services.
- Outlook and market conditions: Management acknowledged consumer demand softness in September and October with preliminary October comps down ~2%, but remained confident in positive comps for FY2026 driven by ongoing initiatives and tariff-driven pricing opportunities. Quote: 'We expect to deliver positive comp store sales in fiscal 2026 and we have a variety of levers to pull that we believe will enable us to achieve meaningfully higher year-over-year adjusted operating income.'

Investment thesis: Monro is transitioning toward a higher-value, service-driven growth model backed by scale, technology-enabled marketing, and disciplined cost management. The QQ2 2026 results show sequential improvement in margins and a positive comp trajectory despite a softer macro environment. The real estate optimization, coupled with expanded digital marketing and a more effective store operations framework, supports an attractive path to higher adjusted EPS in FY2026. Key catalysts include successful rollout of the marketing program to the broader store base, the continued monetization of real estate dispositions, and the ability to sustain or improve gross margins via pricing optimization and supplier negotiations. Risks to monitor include macro consumer weakness, tariff-driven cost inflation, and the pace of rollout execution. Overall, the stock offers a balanced risk/reward profile with a constructive medium-term growth trajectory anchored by cash flow strength and a diversified, non-discretionary service proposition.