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Monro (MNRO -8%) is trading lower on weak guidance for Q4 (Mar). Given the size of the downside guidance, it's a bit surprising the stock isn't down more. Regardless, it should put investors in automotive retailers on notice for some potentially rough quarters as we approach earnings season in a couple of weeks.

Let's take a quick look at the guidance and the steps MNRO is taking to weather the virus storm:

• MNRO expects Q4 (Mar) revenue of just $286.1 mln, well below the $308.1 mln consensus. Same store comps are expected at -9.5%, an acceleration from the -0.9% comps in Q3 (Dec).
• While not providing Q4 EPS, the company did provide full year EPS guidance and with MarQ being the final quarter of the fiscal year, it's basically Q4 guidance. MNRO expects EPS to be well below the low end of prior guidance of $2.25-2.35, which was already below consensus of $2.37.
• MNRO says COVID-19 significantly impacted its Q4 results as it was hurt by a substantial decrease in traffic since mid-March.
• COVID was not the only headwind. Mild weather in its northern markets during January and February also hurt comps. Winter months tend to be slower already as most people wait for warmer weather to do maintenance. However, a cold and snowy winter can help boost sales as the cold weather can cause parts to fail.
• The good news is that MNRO's stores have been deemed essential services and are allowed to continue to operate, albeit on reduced hours, even in those areas that have issued "shelter-in-place" orders.
• To boost its cash reserves, MNRO has drawn down the remaining $350 mln from its revolving credit facility, it's deferring non-critical capital expenditures including remodels and it's reducing store hours/labor to match demand.

Investors should brace for more lowered guidance from companies in general next week now that we're in that period after the quarter ended but before earnings season. We also think there is a decent chance we will see lowered guidance specifically from automotive retailers like AutoZOne (AZO), Advanced Auto (AAP), O'Reilly (ORLY), and Genuine Parts (GPC). MNRO is a little different as it's more of a repair/tire shop rather than primarily a retailer of automotive parts. However, all of these companies tend to face the same market dynamics in terms of car maintenance timelines and weather.

On a final note, which is a bit of a bright spot. MNRO's stock price is holding up fairly well as we think much of the bad news may have already been priced in. The stock is down 45% since mid-December, so we think the mild winter has perhaps already been taken into account. However, investors should brace for difficult results to continue into the spring/early summer, when hopefully there is pent-up demand by mid-summer assuming the virus eases.