APPLETON, Wis. — Carl Icahn, the legendary investor known for his aggressive shareholder activism, has taken a significant stake in Monro Inc., a company specializing in automotive repair and tire services, signaling a potential shake-up in the struggling auto repair sector.
On November 5, Icahn filed a 13D form with the U.S. Securities and Exchange Commission, revealing that he had acquired a 14.79% position in Monro, according to the filing. This move sent the company's shares surging more than 15% immediately after the announcement, providing a much-needed boost to a stock that has been battered by declining sales and operational challenges.
Monro, based in Rochester, New York, operates over 1,100 repair shops and tire dealers across 32 states under various regional brands. The company offers a wide array of services, including brake repairs, muffler and exhaust system work, steering, drive train, suspension, wheel alignment, tire replacement, and routine maintenance like oil changes, state inspections, and fluid services tailored to specific vehicle makes and models.
According to company reports, Monro has been grappling with several headwinds in recent years. Macroeconomic factors such as reduced consumer demand, rising material and labor costs, and a shift toward lower-margin tire products have squeezed margins and stifled growth. For fiscal year 2025, Monro reported a 4.9% decrease in sales, marking the second consecutive year of significant revenue declines. In response, the company announced plans to close approximately 145 underperforming locations.
The firm's third-quarter earnings, released recently, further disappointed investors, showing weaker-than-expected revenue and a lack of specific financial guidance for the upcoming fiscal year. Shares plummeted 16.7% the day after the report. Additionally, questions have arisen about Monro's dividend payout ratio, which has remained substantial despite these ongoing struggles.
Prior to Icahn's disclosure, Monro's stock had underperformed dramatically, dropping 44.73% over the past year, 66.73% over three years, and 63.25% over five years. The company's market value stood at $458.40 million, with shares priced at $15.27 each, according to market data.
Icahn's investment appears timed to capitalize on this depressed valuation. Notably, about 67% of his stake was acquired since the stock's downturn on October 29. Ken Squire, founder and president of 13D Monitor, an institutional research service on shareholder activism, described Icahn as 'the grandfather of shareholder activism and a true pioneer of the strategy.' Squire noted that Icahn 'is very passionate about shareholder rights and good corporate governance and will go to extreme lengths to fight incompetent boards and over compensated managers.'
This isn't Icahn's first foray into the automotive sector. Through Icahn Automotive, part of his conglomerate Icahn Enterprises, he has a long history in automotive parts and services. In 2016, he acquired Pep Boys-Manny, Moe & Jack, and in 2017, he took over Federal-Mogul. When announcing the Pep Boys acquisition, Icahn stated,
'We believe that with our abundant resources and knowledge of the industry we will be able to grow this business and take advantage of consolidation opportunities, thereby benefiting customers, manufacturing partners and employees, as well as our shareholders.'
Squire, who also manages the 13D Activist Fund, suggested that Icahn likely views Monro as 'a great business that is significantly undervalued.' He emphasized Icahn's familiarity with the industry, pointing out that this investment is more than a casual bet but a strategic move in a sector Icahn knows well.
Adding intrigue to Icahn's involvement is Monro's recent decision to eliminate its dual-class share structure. In 2023, the company agreed to collapse this structure, which had given its sole Class C shareholder, Peter J. Solomon, veto power over any matter brought to a shareholder vote. This change, set to occur before the 2026 annual meeting expected in August, effectively transitions Monro from a controlled company to one more aligned with public shareholder interests.
Solomon, an 87-year-old renowned investment banker, has held significant influence over Monro's board decisions. With the veto power ending, Squire said, 'the company has an opportunity to have a real, collaborative, and productive board.' He added that this 'would require its reconstitution, and we know of nobody better or more experienced than Icahn for that endeavor.'
While there is no public evidence that Icahn and Solomon have previously interacted, Squire speculated that they share 'many relationships in common and mutual respect for each other.' He expressed hope for a cordial resolution, envisioning 'the two elder statesmen meeting in a room with an air of civility and cordiality uncommon in the average activist engagement and together coming up with a board that will oversee management, hold them accountable on behalf of shareholders and usher the company through its first real phase as a truly public company.'
Squire noted that with Solomon agreeing to relinquish control and neither likely to remain on the board, 'there is no reason why this should get contentious.' However, he acknowledged the possibility of an acquisition, given Icahn's history. Monro 'appears to fit in very nicely in IEP's automotive business,' Squire said, referencing Icahn Enterprises. He recalled that Icahn has launched activist campaigns at companies he later acquired, such as Pep Boys and Federal-Mogul.
Despite this, Squire believes Icahn's primary motivation is to invest in an undervalued company at an inflection point. 'This is a very small position for him and a good return would not move the needle as much as a synergistic integration into his automotive business, but we see no reason why both things cannot be true,' he said.
As Monro navigates these changes, investors will be watching closely for signs of Icahn's next moves, whether through board reconstitution, strategic improvements, or potentially a full acquisition. The company's shift to a more shareholder-friendly structure could pave the way for renewed growth, but challenges like cost pressures and consumer trends remain. With Icahn's track record, this stake could mark the beginning of a transformative period for Monro and its shareholders.