Midas, Inc. reported net earnings of $0.8 million — or $0.06 per diluted share — for the second quarter ended July 3, 2010, compared to $0.4 million — or $0.03 per diluted share — in the second quarter of 2009.
Second quarter 2010 results were negatively affected by $0.8 million of incremental legal and other expenses incurred in preparation for the July 2010 arbitration with the company’s master licensee in Europe. These arbitration costs had an after-tax impact of $0.03 per diluted share.
The current year also was negatively affected by the emergency acquisition of 22 Midas shops in Northern California from a troubled franchisee in January. In the second quarter, lost royalties and rents and operating losses from these shops had a negative $0.02 per share impact on a year-over-year basis.
The second quarter 2009 results included $0.09 per share of non-cash special items, primarily related to the vesting of restricted stock issued in 2005 and 2006.
Retail Sales
“Midas shops in the United States reported their third consecutive quarter of positive comparable shop retail sales, with an increase of 1.7 percent—following a 2.8 percent increase during the first quarter and a 1.4 percent increase in the fourth quarter of 2009,” says Alan D. Feldman, Midas’ chairman and chief executive officer.
Feldman said that the sales increase resulted primarily from driving a higher volume of shop traffic with value-priced oil changes, which include a courtesy check on all cars coming into the bays. Car count increased by nine percent in U.S. Midas shops in the second quarter.
“We began local promotions of oil changes in early 2009, and shop traffic immediately increased — with double digit increases for all of 2009 and 13 percent in the first quarter of this year,” he states. “Importantly, the significant decline in the average repair order that began when we first implemented this strategy has leveled off, as the average repair order has been stable throughout 2010.”
Oil change revenues were up by 17 percent in the second quarter in U. S. shops and tire sales increased by five percent. Suspension sales were up by six percent and exhaust increased by three percent. Brakes declined by four percent.
Comparable shop sales at U.S. company-operated Midas shops were up slightly in the second quarter. Strong comparable shop sales increases at company-operated shops in San Diego, in Florida and in the Northeast were offset by double-digit declines at the company shops in Northern California that were acquired in January of this year.
“Last November, we introduced a new operations process called ‘Midas Way’ in Philadelphia, with prescribed procedures for each point of contact with customers, from initial phone calls to follow-up after the service work is performed,” Feldman says. “Comparable retail sales at participating shops in Philadelphia increased by 14 percent in the first half over the same period a year ago, with brake sales up 10 percent.”
“Midas Way” training, which is rolling out throughout North America, has been completed for approximately one-third of the Midas shops in the U.S. and Canada. Early results indicate that shops fully participating in “Midas Way” training are beginning to show improved performance compared to shops that have not been trained.
Feldman said that the positive sales trend has continued into July as U.S. comparable shop sales increased by more than five percent for the month.
For complete results, visit www.midas.com.
