Tops Holds Steady in Q4, F16
Tops Holding II Corp. the indirect parent of Tops Markets LLC, has reported an inside-sales increase of $28.3 million, 5.4 percent, for the fourth quarter ended Dec. 31, 2016, when excluding the extra sales week in fiscal 2015. Full-year inside sales were up 2.4 percent to $2.3 billion, excluding that extra week.
The company also added nine supermarkets during 2016, for a total of 172 stores at the end of the year.
“We continued to execute our core strategy by expanding our store base with nine new supermarkets, and, importantly, maintaining or growing market share in each of our key regions during the year,” noted Tops Chairman and CEO Frank Curci. “While 2016 was a tough environment as the industry struggled with persistent food price deflation, we continued to take a long-term view and implement the appropriate steps to make our operations more efficient and set the stage for stronger financial performance when the operating environment improves.”
Continued Curci: “As deflationary headwinds are expected to continue into the first half of 2017, our focus will be much of the same. We will continue to diversify our product portfolio, especially in high-growth categories such as natural and organics, execute strategic initiatives in an effort to drive sales and customer loyalty, and look for additional operational efficiencies to manage our margin profile. And, as we have demonstrated, we will continue to take an opportunistic approach to strategic acquisitions or new store development that can further strengthen our footprint.”
Tops’ Q4 same-store sales dipped 1.9 percent as a result of food cost deflation in such categories as meat and dairy, along with lower traffic levels. Further, the company attributed about 30 basis points of the same-store sales decline to lower federal funding for the Supplemental Nutritional Assistance Program (SNAP). Fuel sales were lower due to one fewer week in the quarter.
According to the grocer, the 110-basis-point decrease in gross profit margin during the quarter was because of a $1.9 million increase in self-insured workers’ compensation claims expense and a $1.6 million reduction in capitalized warehousing costs. Additionally, Tops upped its promotional activity in the quarter, through such efforts as its introduction of the Tops brand into new markets after acquiring six stores last August.
For the full year, the company narrowed its net loss from $15.4 million during the fourth quarter of fiscal 2015 to $13.8 million during the fourth quarter of fiscal 2016. The company said that the improvement in net loss was mainly the result of debt extinguishment costs incurred in the fiscal 2015 second quarter related to last year’s debt refinancing.
Full-year inside sales rose due to the $94.6 million incremental contribution from 14 acquired and new supermarkets since May 2015, partly offset by $42.9 million of sales related to the additional week in fiscal 2015 and a 1.8 percent dip in same store sales, according to Tops. About 50 basis points of the same-store sales decline was attributable to lower federal funding for SNAP, while the rest was due to the same factors that affected the Q4 results, the company added.
Tops’ full-year fuel sales were adversely affected by a 12.8 percent decrease in the average retail price paid per gallon, while its gross profit margin improved by 10 basis points, mainly because of product mix, given the smaller proportion of relatively lower-margin fuel sales.
The company expects to invest $20 million to $25 million in capital expenditures during fiscal 2017.
Williamsville, N.Y.-based Tops and operates 172 corporate supermarkets: 171 under the Tops banner and one under the Orchard Fresh banner, with another five stores operated by franchisees under the Tops banner. The chain employs about 15,000 associates in New York, northern Pennsylvania, Western Vermont and north central Massachusetts.