# Dear Fellow Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NASDAQ_MNRO_2020/NASDAQ_MNRO_2020.mmd` · pages 7-13_

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Dear Fellow Shareholders,

Fiscal 2020 was an instrumental year in our Company transformation. We made a number of strides in the execution of our Monro.Forward strategy and reached critical milestones in our journey to build a scalable platform for sustainable growth. While we recognize our financial performance was challenged during the year, particularly in light of the unprecedented impact of the COVID-19 pandemic on our fourth quarter results, we are firmly committed to our strategy and remain confident in our path forward. The changes we are making across our business to drive operational excellence and streamline our organization position us well to deliver a consistent, 5-star customer experience and long-term shareholder value.

Importantly, I would like to thank our teammates, whose commitment and dedication to excellent customer service have been critical as we make strategic improvements to our business to drive stronger future performance.

## Executing Monro.Forward

Our Monro.Forward strategy centers around four pillars including: Improving Customer Experience, Enhancing Customer-Centric Engagement, Optimizing Product & Service Offering and Accelerating Productivity & Team Engagement. Our strategy is further supported by investments in technology and data analytics, as we are working to increase the overall lifetime value of our customers, drive operational consistency and enhance productivity across all our store locations.

## Transforming our Store Base

During fiscal 2020, we made significant progress on our store rebrand and reimage initiative, which focuses on creating a more consistent store appearance while implementing standardized in-store operating procedures, which we call our Monro Playbook. We are consolidating our brand portfolio and rebranding select service stores to tire banners to optimize our portfolio and drive increased tire revenues without sacrificing service revenues. We transformed 175 stores in fiscal 2020, and have rebranded 71 stores to tire brands. While we are still in the early innings of this initiative, we are very encouraged by the solid performance of our rebranded stores, which underscores the strong opportunity we have and the benefits that come with a streamlined brand portfolio. In addition, as part of this initiative, we have partnered with a customer analytics firm to provide market segmentation and demographic data specific to geographic areas in the vicinity of our Monro locations. This has allowed us to assess our existing real estate portfolio and identify a total of 42 underperforming stores for closure. We expect this one-time, planned portfolio adjustment to drive a more efficient organization and improve our operating income by $5.1 million on an annual basis.

## Investing in Technology to Support Growth

During the year, we made critical investments in technology that will support our future operations. This includes implementing our store network infrastructure upgrade and new digital phone system, which will help us be more sophisticated in our customer execution approach and will be instrumental in driving more traffic to our stores. Through our digital phone system, we are creating a centralized call center that provides added flexibility and significantly improves our customer responsiveness. In the fourth quarter, we also launched the pilot stages of our tire category management and pricing tool, which provides real-time visibility into demand dynamics, allowing us to better refine our assortment and execute our strategy to be the number one destination for tires at any price point. Lastly, in the fourth quarter, we began transitioning to our data-driven store staffing and scheduling tool, which will allow us to seamlessly adjust our labor in response to changing demand dynamics by more accurately rebalancing the number of technicians and the level of skillsets in each store.

While we are still in the process of rolling these initiatives out across our store base, we firmly believe they will be instrumental in improving our customer execution and driving long-term margin expansion.

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## Expanding and Diversifying Our Store Footprint

We also made impressive strides in expanding and diversifying our geographical footprint through strategic acquisitions in fiscal 2020. We acquired more than 50 stores in California, representing entry into the dynamic Western region. Our position in this market was further solidified by acquisitions of 18 stores in Idaho and Nevada, new states for our Company. In addition, we acquired 20 stores in Louisiana, a new state for Monro that expanded our presence in the Southern markets.

Importantly, by executing our strategic initiatives, including our new brand standards and operating procedures, we expect to integrate our new acquisitions more effectively and efficiently. Our disciplined acquisition strategy has delivered significant growth over the years and remains a key pillar of our Monro.Forward strategy.

## Demonstrating Our Commitment to Best-in-Class Customer Service

Finally, we have maintained a focus on improving our in-store execution and customer experience, leveraging the feedback we receive to drive enhanced customer satisfaction and improve our online reputation. These efforts increased our all-time star rating to 4.6 stars across online review sites at the end of the year.

Overall, we are extremely pleased with the initiatives we accomplished during fiscal 2020, and believe we made solid progress in positioning our business for long-term growth.

## Delivering Results in a Dynamic Environment

The transformation we are undergoing is substantial, and we recognize our results will not be linear as we move through this journey. In fiscal 2020, we reported sales of \(1.257 billion and diluted earnings per share of \)1.71. We are committed to improving performance by focusing on the elements of our business that are within our control, and the structural changes we are making across our organization are necessary for us to achieve strong results no matter the external circumstances.

When the effects of the global COVID-19 pandemic began to substantially impact our business late during the fourth quarter, our organization reacted quickly, focusing on three key priorities: prioritizing health and safety in all aspects of our business, ensuring business continuity to serve our customers and emerging even stronger post-crisis. I am pleased with our team's agility and flexibility and believe the actions we have taken position us well to capitalize on the opportunities ahead.

## 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 $30M in dividends in fiscal 2020 and recently announced a quarterly dividend for the first quarter of fiscal 2021.

## A Look Back
at Fiscal 2020

![](images/8_0.jpg)

## $1.257B

in sales in Fiscal 2020, totalling a 5% increase.

![](images/8_1.jpg)

## $120M

in annualized sales represented by acquisitions completed in 2020, with entry into four new markets.

![](images/8_2.jpg)

## 4.6

stars average company star rating across online review sites at the end of fiscal 2020.

![](images/8_3.jpg)

## $30M

returned in cash to shareholders through dividends in fiscal 2020.

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## Promoting Corporate Responsibility

Monro strives to maintain an environmentally and socially conscious corporate culture, as demonstrated by our efforts to promote sustainability and recycling across our organization, support charitable organizations that help the communities we serve, provide transparency to our investors and invest in our teammates to ensure a safe and rewarding workplace.

During the year, as part of our commitment to protect the environment, Monro recycled 3.2M gallons of oil and 3.9M tires, as well as approximately 87,000 vehicle batteries and 120 tons of cardboard. We seek to proactively engage with the communities we serve by giving back our time and financial resources, including donating over $525,000 to the United Way and other charities in the past two years. Among other shareholder engagement, we had 147 opportunities to talk directly with investors and analysts at investor meetings and on conference calls.

In an exciting development both in our commitment to the environment and in responding to shareholder feedback, this proxy season, for the first time, Monro will follow the Securities and Exchange Commission's "e-proxy" rules that allow public companies to furnish proxy materials to shareholders over the Internet, therefore reducing the amount of paper consumed during this process. Finally, we are committed to supporting our teammates and have expanded our ongoing learning and professional development opportunities through Monro University, our online training platform, as well as by implementing mandatory onboard training for new hires to help them better thrive at Monro. These efforts are improving engagement and satisfaction among our teammates, resulting in the lowest annual turnover rates since 2015.

## Creating Long-term Value

In summary, fiscal 2020 was a critical year in our Company transformation. We accomplished a number of key initiatives and made fundamental changes across our organization that position us well to continue to deliver long-term sustainable value for our shareholders. I have firm conviction in our path forward and look forward to capitalizing on the significant opportunities ahead of us

On behalf of the Board of Directors and the Monro leadership team, I would like to thank you for your continued support and confidence. I look forward to speaking with you at our virtual annual meeting on August 18, 2020.

Sincerely,

![](images/9_0.jpg)

President and Chief Executive Officer

![](images/9_1.jpg)