# DEAR FELLOW
SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NASDAQ_MNRO_2019/NASDAQ_MNRO_2019.mmd` · pages 6-12_

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DEAR FELLOW
SHAREHOLDERS,

Fiscal 2019 was an exciting year of transformative changes for our Company. We are very pleased with the tremendous progress we have made towards our Monro. Forward strategy that we unveiled one year ago. We successfully implemented a number of critical initiatives during the year, focusing on driving operational excellence and delivering a consistent, best-in-class customer experience to build a scalable platform for growth. We are also encouraged by the continued momentum we are experiencing across our business and believe our strong financial performance this year underscores the effectiveness of our strategy.
Importantly, I would like to thank our teammates across our organization who have shown outstanding commitment, hard work, and dedication to our customers as we continue to execute Monro. Forward.

![](images/6_0.jpg)

## EXECUTING OUR MONRO.FORWARD STRATEGY

Our Monro.Forward strategy centers around four pillars, supported by a number of investments in technology and data analytics to increase the overall lifetime value of our customers.

## Improving Customer Experience

Our primary objective is to deliver a 5-star experience for all our customers by driving increased consistency and operational improvement across our store base. Throughout the year, we made strong progress to enhance our customer satisfaction and manage our online reputation, which has led to a material improvement in our Company star rating across online review sites in a short period of time, as evidenced by our average 4.7 star rating in fiscal 2019. Importantly, the feedback we collected from our customer survey and online reputation management program provided us with valuable insights to drive consistent execution as we launched our largest initiative to improve our customer experience, our store refresh program. This effort is two-fold and starts with the implementation of standardized operating procedures, which we call our Monro Playbook, followed by the reimagining of our stores to be more modernized and inviting. During the third quarter of fiscal 2019, we successfully completed a pilot program at 31 stores in Rochester, NY. The completion of our refresh drove a sequential increase in traffic and comparable store sales at these locations, as well as meaningful improvement across every guest experience metric. We are very pleased with these initial results and will roll out this initiative across our store base over the next three to five years. Additionally, we have identified opportunities to consolidate our retail brand portfolio into five regional power brands. As part of our broader store refresh initiative, we will leverage customer data analytics to optimize local brand awareness and banner concentration in targeted markets, shifting selected stores to a tire-oriented banner where we see strong upside opportunity. Overall, we believe that these changes position us well to improve conversion and drive increased traffic to our stores.

## Enhancing Customer-Centric Engagement

Our second key pillar is to engage with our customers more effectively by investing in higher ROI marketing channels to drive increased customer retention and new customer acquisition, while developing our online presence. To further these efforts, we launched a collaboration with Amazon.com to provide tire installation services at Monro's retail tire and automotive service centers to customers who purchase tires from Amazon.com and select the Ship-to-Store option. Since the initial roll out during the first quarter of fiscal 2019, we have expanded this collaboration to over 800 stores across the Eastern, Western and Central United States. We are encouraged by the positive customer feedback we have received and are on track to offer this option for tire installation across our entire store base. Additionally, we achieved a critical milestone in the development of our omni-channel strategy by launching our new corporate and retail websites. These modernized websites allow us to better address our customers' needs, driving

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## A LOOK BACK AT
FISCAL 2019

![](images/7_0.jpg)

Fiscal 2019
sales increased 6%
to a record
$1.2 billion

![](images/7_1.jpg)

Delivered 4 consecutive quarters of comparable store sales growth in fiscal 2019

![](images/7_2.jpg)

Acquisitions completed and announced in fiscal 2019 represent a total of $132 million in annualized sales and entry into two new markets

![](images/7_3.jpg)

Ending fiscal 2019 with
4.7 stars
average company star rating
across online review sites

![](images/7_4.jpg)

We returned
$27 million
to shareholders through
14 dividend increases
in 14 years

an increase in web traffic and mobile appointment conversion. As part of our initiatives to optimize our marketing spend, we implemented our data-driven Customer Relationship Marketing (CRM) platform and new customer acquisition campaigns. By leveraging predictive analytics, we are able to deliver tailored messages and service recommendations to our customers, as well as identify prospective customers with a high propensity to purchase our offerings, driving a notable increase in conversion.

## Optimizing Product & Service Offering

Our third strategic priority is to optimize our products and services, allowing us to provide our customers with clearly defined options at all price points. During the first quarter of fiscal 2019, we launched our Good-Better-Best product and service packages, which coupled with our consistent in-store selling approach drove strong conversion and gross margin expansion during fiscal 2019, with particular strength in our brake category. Offering clearly-defined options keeps the customer education and selling process simple and gives our teammates trade-up and attachment sale opportunities. We also made progress towards our goal of becoming the number one destination for tires at any price point by further optimizing our tire assortment in the fourth quarter. Specifically, we introduced new branded tires to round out our assortment mix, while optimizing branded tire margins.

## Accelerating Productivity & Team Engagement

Our fourth objective is to accelerate the productivity and engagement of our teammates, who are the driving force behind our success. As a first step, we rightsized our store staffing model to ensure we are staffing our stores with the appropriate level of support, allowing us to achieve greater efficiency and gross margin expansion during fiscal 2019. To advance our efforts to train and retain our talent, in the third quarter of fiscal 2019 we launched our Monro University pilot. This robust cloud-based curriculum is designed to arm our technicians with both the technical skill set needed to effectively serve our customers today, as well as ongoing training to handle future technician requirements in the face of increasing vehicle complexity. Leveraging this platform, we are enhancing our employer value proposition to create a clear path for career growth at Monro. We have received positive feedback from our technicians who have engaged with Monro University so far, and we look forward to making it available for our over 8,600 teammates across the organization. Importantly, the changes we are making to improve professional development and teammate satisfaction have led to steady decline in our quarterly turnover during the year to the lowest levels since the fourth quarter of fiscal 2015.

Overall, the initiatives we have accomplished this year have shown strong traction and position us well to capitalize on the opportunities that lie ahead.

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Lastly, we continue to capitalize on highly accretive acquisition opportunities in our fragmented industry, with acquisitions announced and completed in fiscal 2019 representing an expected $132 million in annualized sales. Importantly, we have made significant strides in diversifying and strengthening our store footprint with the recent acquisitions of 12 stores in Louisiana, as well as 40 stores and one distribution center in California, entering two new states. The expansion of our geographic footprint to the West Coast provides us with a strong platform for further expansion into a dynamic and attractive region.

## DELIVERING ON OUR GROWTH TARGETS

Our solid financial performance in fiscal 2019 demonstrates the strength of our growth strategy. We achieved our first full year of comparable store sales growth since fiscal 2012 on a 52-week basis, as well as record sales of \(1.2 billion and record diluted earnings per share of \)2.37, in line with our guidance. Importantly, the strategic initiatives we have implemented across our business have led to enhanced in-store execution and a remarkable improvement in customer satisfaction. Building off this strong foundation, we are confident in our ability to drive further growth in fiscal 2020 and beyond to deliver sustainable, long-term value for our shareholders.

## ENHANCING SHAREHOLDER VALUE

Returning cash to our shareholders is a top commitment for our Company and a key component of our disciplined capital allocation strategy. We paid approximately $27 million in dividends in fiscal 2019 and recently announced a 10% increase in our quarterly dividend, marking the 14th consecutive annual dividend increase since we first initiated a cash dividend 14 years ago.

## PROMOTING CORPORATE RESPONSIBILITY

Monro maintains an environmentally and socially conscious corporate culture, as demonstrated by our recycling policies at our offices, warehouses and stores, as well as our support of charitable organizations dedicated to caring for the communities and neighborhoods we serve.

In fiscal 2019, as part of our commitment to protecting the environment, Monro recycled 3.1 million gallons of oil and 3.2 million tires, as well as approximately 288,000 vehicle batteries and 120 tons of cardboard.

Monro strives to proactively engage with the communities who have enabled our success over the past 62 years, giving back our time, talent and financial resources however possible. During fiscal 2019, Monro and its teammates donated to a number of charities, including donating approximately $165,000 to the United Way.

## DRIVING FUTURE GROWTH

In summary, fiscal 2019 marked a strong year for Monro as we achieved a number of key milestones in our effort to build a scalable platform for sustainable growth while continuing to execute on our disciplined acquisition strategy. As we enter fiscal 2020, we are well positioned to carry our momentum forward and deliver another year of solid growth. I am confident our unique business model, coupled with the execution of our Monro.Forward strategy, will allow us to capitalize on favorable industry tailwinds and drive long-term shareholder value.

On behalf of the Board of Directors and the Monro Leadership Team, I would like to thank you for your continued support and confidence.

Sincerely,

![](images/8_0.jpg)

President and Chief Executive Officer