Village Super Market, Inc. (NASDAQ:VLGEA) (the "Company" or
"Village") today reported its results of operations for the third
quarter ended April 25, 2020.
Sales and results of operations in the 13 weeks
ended April 25, 2020 were significantly impacted by the COVID-19
outbreak. Same store sales increased 13.6% and net income increased
97%, adjusted for special items, in the 13 weeks ended April 25,
2020 compared to the prior year. Village operates in and around one
of the epicenters of the health crisis with much of our trade area
under stay-at-home orders since mid-March 2020. The Company is
classified as an essential business and has remained open to serve
our customers and the communities in which we operate.
Our first priority throughout this unprecedented
time has been and will continue to be the safety of our associates
and our customers. In response to COVID-19, Village incurred
incremental operating expenses of over $5,500,000 in the 13 weeks
ended April 25, 2020 for programs and new initiatives
implemented to support and protect our associates, customers and
communities, including:
- Enhanced and more frequent
sanitation practices, including hourly cleaning of high touch point
areas throughout our stores, nightly deep cleaning and bi-weekly
disinfectant fogging in every store
- Reduced store operating hours,
including the closure of all stores on Easter Sunday, to provide
time for our associates to rest and complete the enhanced cleaning
practices
- Created a centralized call center
to provide our associates with consistent, accurate, reliable
guidance regarding Company policies and CDC recommended
protocols
- Created a text communication
platform to provide enrolled associates with real-time alerts and
updates
- Expanded remote work capabilities
for office associates and limited travel of regional supervision
teams
- Provided over 150,000 meals,
including two hot meals during the day to all associates on duty
and a boxed lunch to all night crew associates, through the Feeding
Our Village Heroes Program
- Provided over 15,000 meals sourced
from local restaurants to healthcare professionals through our
Heroes Feeding Heroes program
- Reserved the first hour of business
each day for elderly and at-risk customers
- Implemented a temporary wage
premium of $2 per hour above the standard base rate of pay for all
hourly front-line associates and weekly premiums for salaried
front-line associates, applied to hours worked from March 22nd
through June 13th
- Accelerated payment of quarterly
bonuses for the 13 weeks ended April 25, 2020
- Provided Emergency Paid Leave to
associates affected by COVID-19
- Maintained health care coverage for
all associates unable to work due to COVID-19
- Blue Squares for Social Distancing
program - installed floor markers and additional signage in high
traffic areas to signify six-foot distances to encourage proper
social distancing
- Installed plexiglass shields at all
registers, guest services and pharmacy counters
- Reduced offerings at service
departments, eliminated the sale of bulk self-service merchandise
and closed in-store restaurants and dining areas to assist and
encourage social distancing
- Limited the number of customers to
approximately 30% of each store's maximum occupancy
- Implemented a Personal Protective
Equipment program and provided associates with masks and
gloves
- Donated and supplied masks to local
hospitals
- Implemented temperature checks for
all associates
- Expanded digital capabilities,
including four rapidly deployed "pop-up" ShopRite from Home stores,
contactless pickup and prescription drug pickup and delivery
- Expanded partnerships with online
grocery picking and delivery services to better support our
customers increased demand for these services
- Introduced the Essentials Box
Program - providing a safe and convenient way to stock up on
in-demand produce or cleaning products, pre-packaged and available
for delivery
- Expanded mobile scan to an
additional 10 stores
Results of Operations for the 13 Weeks Ended
April 25, 2020
Net income was $11,152,000 in the 13 weeks ended
April 25, 2020 compared to $4,970,000 in the 13 weeks ended
April 27, 2019. The 13 weeks ended April 25, 2020
includes a gain on the sale of pharmacy prescription lists related
to three store pharmacies closed in March 2020 of $854,000 (net of
tax). The 13 weeks ended April 25, 2020 includes pension
settlement charges of $83,000 (net of tax) compared to $302,000
(net of tax) in the 13 weeks ended April 27, 2019. Excluding
these items from both periods, net income increased 97% in the 13
weeks ended April 25, 2020 compared to the prior year.
Sales were $458,292,000 in the 13 weeks ended
April 25, 2020, an increase of 15.9% compared to the 13 weeks
ended April 27, 2019. Sales increased due to the opening of
the Stroudsburg replacement store on November 1, 2019, the
acquisition of Gourmet Garage on June 24, 2019 and a same store
sales increase of 13.6%. Same store sales increased due primarily
to the impact of the COVID-19 outbreak and related stay-at-home
measures, most significantly in March where sales reached
unprecedented levels. Same store sales also increased due to
continued sales growth in the Bronx, New York City store opened on
June 28, 2018 and digital sales growth of 41.8%. New stores and
replacement stores are included in same store sales in the quarter
after the store has been in operation for four full quarters. Store
renovations and expansions are included in same store sales
immediately.
Gross profit as a percentage of sales increased
to 28.34% in the 13 weeks ended April 25, 2020 compared to
27.97% in the 13 weeks ended April 27, 2019. Excluding the
impact of the addition of Gourmet Garage, gross profit as a
percentage of sales increased .16% in the 13 weeks ended
April 25, 2020 compared to the 13 weeks ended April 27,
2019 due primarily to lower promotional spending due to uncertainty
of product availability during the COVID-19 outbreak (.49%) and
increased leverage on fixed warehouse assessment charges from
Wakefern (.26%). These increases were partially offset by an
unfavorable change in product mix (.37%), decreased departmental
gross margin percentages (.18%) and decreased patronage dividends
and rebates received from Wakefern (.05%). Both product mix and
departmental gross margin percentages were impacted by limitations
in service departments and product availability as a result of the
COVID-19 outbreak. Additionally, departmental gross profits
decreased due to price investments, including the ShopRite's Right
Price Promise pricing strategy, a commitment to everyday low prices
on the items customers purchase most frequently, introduced in
October 2019, and decreased pharmacy margins as a result of
continued downward pressure on prescription reimbursement rates
from third party providers.
Operating and administrative expense as a
percentage of sales decreased to 23.34% in the 13 weeks ended
April 25, 2020 compared to 24.62% in the 13 weeks ended
April 27, 2019. The 13 weeks ended April 25, 2020
includes a gain on the sale of pharmacy prescription lists related
to three store pharmacies closed in March 2020 (.26%), lease costs
reclassified from Depreciation and Amortization and Interest
Expense to Operating and Administrative Expense (.14%) as a result
of the adoption of ASU 2016-02, “Leases,” and a reduction in
pension settlement charges of (.08%) compared to the 13 weeks ended
April 27, 2019. Excluding these items, operating and
administrative expense as a percentage of sales decreased 1.08% in
the 13 weeks ended April 25, 2020 compared to the 13 weeks
ended April 27, 2019 due primarily to leverage from higher
sales despite incremental costs related to COVID-19, including
enhanced wages and benefits and expanded safety and sanitation
protocols (1.21%).
Net income was $15,724,000 in the 39 weeks ended
April 25, 2020 compared to $18,810,000 in the 39 weeks ended
April 27, 2019. The 39 weeks ended April 25, 2020
includes a gain on the sale of pharmacy prescription lists related
to three store pharmacies closed in March 2020 of $854,000 (net of
tax), a non-cash pension charge related to the termination of a
company-sponsored pension plan and other pension settlement charges
of $953,000 (net of tax), pre-opening costs related to the
Stroudsburg, Pennsylvania replacement store of $891,000 (net of
tax) and store closure costs and charges to write off the lease
asset and related obligations for the old Stroudsburg store of
$557,000 (net of tax). The 39 weeks ended April 27, 2019
includes a $290,000 (net of tax) gain for Superstorm Sandy
insurance proceeds received and pension settlement charges of
$301,000 (net of tax). Excluding these items from both periods, net
income decreased 8% in the 39 weeks ended April 25, 2020
compared to the prior year.
Village Super Market operates a chain of 35
supermarkets under the ShopRite and Fairway names in New Jersey,
Maryland, New York and eastern Pennsylvania and three specialty
markets under the Gourmet Garage name in New York City.
Forward Looking Statements
All statements, other than statements of
historical fact, included in this Press Release are or may be
considered forward-looking statements within the meaning of federal
securities law. The Company cautions the reader that there is no
assurance that actual results or business conditions will not
differ materially from future results, whether expressed, suggested
or implied by such forward-looking statements. The Company
undertakes no obligation to update forward-looking statements to
reflect developments or information obtained after the date hereof.
The following are among the principal factors that could cause
actual results to differ from the forward-looking statements: the
impact of the COVID-19 pandemic on our business and the economy;
economic conditions; competitive pressures from the Company’s
operating environment; the ability of the Company to maintain and
improve its sales and margins; the ability to attract and retain
qualified associates; the availability of new store locations; the
availability of capital; the liquidity of the Company; the success
of operating initiatives and acquisitions; consumer spending
patterns; the impact of changing energy prices; increased cost of
goods sold, including increased costs from the Company’s principal
supplier, Wakefern; disruptions or changes in Wakefern's
operations; the results of litigation; the results of tax
examinations; the results of union contract negotiations;
competitive store openings and closings; the rate of return on
pension assets; and other factors detailed herein and in the
Company’s filings with the SEC.
VILLAGE SUPER MARKET, INC.CONSOLIDATED STATEMENTS
OF OPERATIONS(In thousands, except per share amounts)
(Unaudited)
|
13 Weeks Ended |
|
39 Weeks Ended |
|
April 25, 2020 |
|
April 27, 2019 |
|
April 25, 2020 |
|
April 27, 2019 |
|
|
|
|
|
|
|
|
Sales |
$ |
458,292 |
|
|
$ |
395,458 |
|
|
$ |
1,303,116 |
|
|
$ |
1,225,137 |
|
|
|
|
|
|
|
|
|
Cost of sales |
328,391 |
|
|
284,847 |
|
|
941,722 |
|
|
884,678 |
|
|
|
|
|
|
|
|
|
Gross profit |
129,901 |
|
|
110,611 |
|
|
361,394 |
|
|
340,459 |
|
|
|
|
|
|
|
|
|
Operating and administrative
expense |
106,987 |
|
|
97,351 |
|
|
317,861 |
|
|
293,679 |
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
7,678 |
|
|
6,566 |
|
|
22,914 |
|
|
20,481 |
|
|
|
|
|
|
|
|
|
Operating income |
15,236 |
|
|
6,694 |
|
|
20,619 |
|
|
26,299 |
|
|
|
|
|
|
|
|
|
Interest expense |
(563 |
) |
|
(1,106 |
) |
|
(1,698 |
) |
|
(3,334 |
) |
|
|
|
|
|
|
|
|
Interest income |
910 |
|
|
1,402 |
|
|
3,199 |
|
|
3,886 |
|
|
|
|
|
|
|
|
|
Income before income
taxes |
15,583 |
|
|
6,990 |
|
|
22,120 |
|
|
26,851 |
|
|
|
|
|
|
|
|
|
Income taxes |
4,431 |
|
|
2,020 |
|
|
6,396 |
|
|
8,041 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
11,152 |
|
|
$ |
4,970 |
|
|
$ |
15,724 |
|
|
$ |
18,810 |
|
|
|
|
|
|
|
|
|
Net
income per share: |
|
|
|
|
|
|
|
|
|
Class A common stock: |
|
|
|
|
|
|
|
Basic |
$ |
0.86 |
|
|
$ |
0.39 |
|
|
$ |
1.22 |
|
|
$ |
1.46 |
|
Diluted |
$ |
0.77 |
|
|
$ |
0.34 |
|
|
$ |
1.09 |
|
|
$ |
1.31 |
|
|
|
|
|
|
|
|
|
Class B common stock: |
|
|
|
|
|
|
|
Basic |
$ |
0.56 |
|
|
$ |
0.25 |
|
|
$ |
0.79 |
|
|
$ |
0.95 |
|
Diluted |
$ |
0.56 |
|
|
$ |
0.25 |
|
|
$ |
0.79 |
|
|
$ |
0.95 |
|
|
|
|
|
|
|
|
|
Gross profit as a % of
sales |
28.34 |
% |
|
27.97 |
% |
|
27.73 |
% |
|
27.79 |
% |
Operating and administrative
expense as a % of sales |
23.34 |
% |
|
24.62 |
% |
|
24.39 |
% |
|
23.97 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contact: |
John Van Orden, CFO |
|
(973) 467-2200 |
|
villageinvestorrelations@wakefern.com |
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