# TO OUR
FELLOW SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NASDAQ_MNRO_2018/NASDAQ_MNRO_2018.mmd` · pages 6-12_

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TO OUR
FELLOW SHAREHOLDERS,

Fiscal 2018 was an important year for Monro. When I joined our Company as CEO this past October, I observed significant opportunities to build upon a solid foundation and rich history and to capitalize on the accelerating momentum in our industry. In the first months of my tenure, I completed a rigorous and comprehensive assessment of our business. This assessment underscored the positive view I had of Monro; the Company has a unique business model in an attractive industry with strong competitive advantages and significant room for growth. Based on this assessment, I developed our key strategic priorities focused on delivering a consistent "5-star" experience to our customers in order to drive higher traffic and increase customer lifetime value. I also enhanced an already capable senior leadership team with seasoned leaders in both Operations and Marketing to assist in executing this plan.

## EXECUTING OUR MONRO.FORWARD STRATEGY

With the full support of our Board of Directors, our management team worked to develop our strategy to build a scalable platform capable of driving sustainable future growth. We call this strategy 'Monro.Forward', which we discussed in detail at our inaugural Investor Day on May 21, 2018.

Monro.Forward centers around four key pillars, which will be supported by a number of investments in technology and data-driven analytics across our business:

## Improving Customer Experience

Our primary focus is to drive operational excellence and deliver a consistent 5-star experience to our customers with a focus on increasing customer lifetime value. It starts with the improvement in our online reputation and increased efforts to solicit customer feedback. Leveraging the insights from this feedback, we are making improvements to our store operations, which, in turn, are leading to a material improvement in Monro's overall star rating across online review sites. The increased number of online reviews is also leading to higher conversion, and most importantly, driving higher traffic to our stores. Additionally, we are setting clear brand standards for how we operate and how we look across our store base. This includes developing standard operating procedures for our teammates using an education-centered approach to position them as expert advisers, who can clearly and professionally provide our customers with options and choices for the work their vehicles need. We are also implementing a store refresh initiative to ensure our stores are inviting and modernized, while remaining appropriate for what our customers expect from the Monro brand.

## Enhancing Customer-Centric Engagement

Our second objective is to engage with our customers more effectively and invest in marketing channels with the highest return to drive increased customer retention and new customer acquisition, and to develop an omni-channel presence. We will leverage our customer relationship marketing platform to reach our customers with the right message for the right service at the right time, increasing brand loyalty and building long-term one-to-one relationships. Our data-analytics will also assist us in identifying high-value potential new customers, as well as optimizing our digital marketing efforts to reach them. Additionally, we recognize the importance of developing a robust omni-channel presence, which we will roll out in two phases: modernizing our online presence through our mobile platform and our website, and creating a seamless buying experience for our customers. We want our customers to be able to find and purchase tires online and seamlessly schedule an appointment for in-store installation. Importantly, our relationships with third-party online retailers represent a meaningful traffic driver and will remain a key part of our online strategy.

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## A LOOK BACK AT
FISCAL 2018

![](images/7_0.jpg)

Fiscal 2018
sales increased 10%
to a record
$1.128 billion

![](images/7_1.jpg)

Acquisitions completed in fiscal 2018 represent a total of $20 million in annualized sales

![](images/7_2.jpg)

Ending fiscal 2018 with
4.0 stars
average company star rating
across online review sites

![](images/7_3.jpg)

We returned
$24 million
to shareholders through
13 dividend increases
in 13 years

## Optimizing Product & Service Offering

Creating a clearly defined product and service offering is another strategic priority which will allow us to improve the customer experience and maximize our ticket through higher conversion. We will accomplish this through a redefined selling approach and optimized tire assortment. By implementing a stronger merchandizing strategy across good, better and best pricing options, we will allow our technicians to properly educate our customers on their vehicle needs and provide them with clear options to choose the right products and services for their vehicle. Given that tires represent half of our sales, we have been particularly focused on optimizing our assortment. We have taken considerable steps to ensure we are offering the right tires at the right prices, leveraging the breadth of our tire brand portfolio.

## Accelerating Productivity & Team Engagement

Given that our teammates are at the heart of our organization, we will implement a number of initiatives to increase productivity and engagement across our base. We will focus on optimizing our store staffing model and using data-driven scheduling to ensure we have the appropriate amount of talent allocated to each store. Additionally, we are committed to attracting, developing and retaining our talent. We want our technicians to have a clearly defined career path at Monro and will provide them with the necessary onboarding materials and proper training to optimize their performance, particularly as vehicles become increasingly complex. We will also ensure our compensation model is based on a balanced scorecard designed to increase incentives as the teammate's performance improves, with maximum payouts for outstanding performance.

We are thrilled about the changes we are making at Monro, and very encouraged by the initial steps we have already taken. We have had a successful rollout of our foundational technology and tools in the fourth quarter, including business intelligence and key performance indicator dashboards and a tablet-based, standardized store review process. Although we have a long way to go, we are off to a great start and very pleased with the positive feedback we have received at all levels of our organization. I would like to thank our dedicated and engaged teammates, who have been working incredibly hard as we implement our strategic initiatives to drive Monro. Forward.

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## BUILDING UPON OUR STRONG BUSINESS MOMENTUM

We are confident that Monro.Forward will allow us to capitalize on the momentum we are seeing across our business. We exited the fiscal year with strong momentum, and are encouraged by our top-line recovery in the fourth quarter, driven by a higher average ticket and overall strength in our tire business. These positive selling trends continued through the beginning of fiscal year 2019, and we remain confident that we will achieve our financial targets for the year while making significant strides in the execution of our strategic plan.

We have also continued to execute on our disciplined acquisition strategy, as evidenced by the Appalachian Tire and Free Service Tire acquisitions we recently completed. High-quality, accretive acquisitions remain a cornerstone of Monro's strategy, and we will continue to build upon and execute on our robust pipeline going forward.

## ENHANCING SHAREHOLDER VALUE

As we are undergoing meaningful changes across our business, we remain focused on delivering long-term shareholder value. Our commitment to returning cash to shareholders is demonstrated by the recently announced 11% increase in our dividend, which marks the 13 \( ^{th} \)  dividend increase since a cash dividend was first issued by our Company thirteen years ago.

## IMPACTING OUR COMMUNITY

Monro strives to maintain an environmentally and socially conscious corporate culture, as demonstrated by our recycling policies at our offices, warehouses and stores and our support of charitable organizations dedicated to caring for the communities and neighborhoods we serve. In fiscal 2018, Monro recycled 3 million gallons of oil and 3 million tires, as well as approximately 280,000 vehicle batteries and 290 tons of cardboard, all as part of the Company's commitment to the environment. Further, Monro and its teammates donated to a number of charities during fiscal 2018, including raising $79,000 for charities in Florida to support our teammates and customers impacted by Hurricane Irma and over $400,000 to the United Way. The Company was pleased to receive the 2017 United Way of Greater Rochester's Chairman's Award for Philanthropic Leadership.

## OUR PATH FORWARD

We are truly excited about the future, and are well-positioned to drive sustainable growth at our Company. We have an experienced leadership team that is ready to build upon the strong foundation and growing momentum of our business, while continuing to consolidate within our fragmented industry through highly accretive acquisitions. The investments we have made in technology and data-driven analytics will help drive increased consistency and productivity across our business, ultimately increasing the lifetime value of our customers. And lastly, the execution of our Monro.Forward strategy will strengthen the scalability of our business, driving a sustainable platform for long-term growth and strong shareholder returns.

On behalf of the Board of Directors and the Monro leadership team, I would like to thank you for your continued support as we enter a new phase in Monro's history.

Sincerely,

Brett T. Ponton

President and Chief Executive Officer