What Happened?
Shares of auto services provider Monro (NASDAQ:MNRO) fell 16.7% in the afternoon session after the company reported third-quarter results that missed revenue expectations and pointed to a weak outlook.
Although Monro's adjusted earnings of $0.21 per share beat analyst estimates, its revenue of $288.9 million fell short, dropping 4.1% from the same period last year. The company noted the decline was partly due to the closure of 156 underperforming stores over the past year. While comparable store sales for the reported quarter rose 1.1%, what likely worried investors was management's commentary on current trends. Monro highlighted a "recent softness in consumer demand," revealing that preliminary comparable store sales for October were down 2%. Adding to the uncertainty, the company did not provide specific financial guidance for the upcoming fiscal year.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Monro? Access our full analysis report here.
What Is The Market Telling Us
Monro’s shares are very volatile and have had 24 moves greater than 5% over the last year. But moves this big are rare even for Monro and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 22 days ago when the stock dropped 3.3% as a confluence of negative economic data pointed to a weak economy. The latest Survey of Consumer Expectations from the New York Fed revealed that households' short-term inflation expectations are rising, while their outlook on the labor market is deteriorating. Consumers expressed greater concern about potential job losses and expect lower earnings growth, factors that directly impact discretionary spending. Adding to the unease, Chief Economist at Moody's Analytics, Mark Zandi, warned that 22 states are already showing clear signs of a recession, placing the broader U.S. economy in a precarious position. The ongoing U.S. government shutdown further dampens sentiment, threatening to weigh on incomes and purchasing power.
Monro is down 38.4% since the beginning of the year, and at $15.11 per share, it is trading 49.3% below its 52-week high of $29.78 from November 2024. Investors who bought $1,000 worth of Monro’s shares 5 years ago would now be looking at an investment worth $356.12.
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