Midas Reports Increased Third Quarter Sales, Oil Change Revenue

Midas last month announced results for its fiscal third quarter ended October 1. The company reported net earnings of $1.4 million for the quarter, compared to $0.8 million in the third quarter of 2010.

For the first nine months of 2011, net earnings were $4.4 million, an increase from $2.3 million in 2010.

“We continued to make solid progress during the quarter in executing our growth strategies, including co-branding our shops, reducing our inventory of company-operated shops and attracting new high-quality franchisees,” said Alan Feldman, Midas’ chairman and chief executive officer. “We are especially encouraged by improving trends in retail sales and operating income, and have now delivered eight consecutive quarters of positive comparable shops sales at U.S. Midas shops. Midas shops continue to drive traffic with value-priced oil changes, which, in turn, has led to growing customer awareness about the breadth of our auto repair and maintenance services.”

Overall, comparable-shop sales at U.S. Midas shops increased by 3 percent in the third quarter. Oil change revenues increased by 3 percent and tire sales grew by 2 percent in the quarter. Suspension sales were up by 8 percent, exhaust increased by 3 percent and brakes declined by 2 percent.

Comparable-shop sales in Canada also increased by 3 percent, driven by a 9 percent increase in traffic and a 12 percent increase in oil change revenues.

Comparable-shop sales at SpeeDee shops in the U.S. were up by 1.6 percent.
In the third quarter, comparable-shop sales at company-operated Midas shops were up 4.6 percent, led by increases of 15 percent in the Northeast shops and 9 percent in Canada.

There were 83 company-operated Midas shops and six company-operated SpeeDee shops at the end of the quarter, down from a combined 116 at the end of the third quarter of 2010. Over the past 12 months, the company has re-franchised 28 company-operated shops, closed two company-operated shops, re-opened one closed shop and acquired two shops.

During the quarter, the company advanced its strategy of co-branding Midas and SpeeDee shops, which is expected to drive accelerated top-line growth and profitability across the network. Thirteen additional shops were co-branded in the third quarter bringing the total to 64.

Of the 64 co-branded shops, 46 were Midas shops and 18 were SpeeDee shops. Twenty-nine of the Midas shops are company-operated locations and 17 are operated by Midas franchisees. Franchisee interest in co-branding continues to expand, with the co-branded shops operated by Midas franchisees reporting a 14 percent increase in comparable shop sales in the third quarter and a 17 percent increase in the first nine months of 2011.

The company expects to have approximately 75 co-branded shops by the end of 2011 and expects to co-brand an additional 100 shops in 2012.

Total sales and revenues for the quarter were $46.3 million, compared to $48.8 million in the third quarter last year. Sales for the first nine months were $140.1 million, down from $145.8 million in the first nine months last year. This anticipated decline in revenues was due to having 27 fewer company-operated Midas and SpeeDee shops compared to 2010, primarily as a result of the company’s ongoing re-franchising efforts.

Midas’ franchising revenues were $14.3 million for the quarter and $41.7 million for the first nine months, up from $13.8 million and $40.7 million for the respective periods in 2010.

The ongoing re-franchising of company-operated shops resulted in having 27 fewer company-operated shops this year compared to 2010, which was offset partially by the 4.6 percent increase in comparable shop sales at Midas company-operated shops in the third quarter.

“We are building value for shareholders through our strategies to accelerate retail sales at existing shops through co-branding, reduce the number of under-performing and available closed shops through re-franchising and improve profitability at company-operated shops,” Feldman said. “We look forward to beginning to expand our shop base in the near future, while sustaining efforts to control costs.”

Midas operates nearly 2,300 franchised, licensed and company-owned Midas shops in 15 countries, including more than 1,500 in the United States and Canada. Midas also owns the SpeeDee Oil Change business, with 163 auto service centers in the United States and Mexico.