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    Roundy's Takes Loss in Q1

    Mariano's growth helping to offset 'softness' in core markets

    By Jim Dudlicek, EnsembleIQ

    Roundy's Inc. reported mixed results for the first quarter of its 2014 fiscal year, posting a net loss of $4.5 million and a net sales increase of 1.9 percent.

    That sales gain, however, reflected the benefit of new stores balanced against a 5.2 percent decrease in same-store sales, plus four store closures, the grocer announced Wednesday during its Q1 conference call.

    “The first quarter was very active for our growth banner, Mariano’s, with the opening of five new stores. We continue to be pleased with Mariano’s very strong customer and community acceptance as well as the banner’s performance to-date,” said Robert Mariano, chairman, president and CEO of Milwaukee-based Roundy’s. “Four of these openings were former Dominick’s stores, and we opened an organic location in Lake Zurich, Ill. In April, we opened two more stores, and one yesterday in the city of Chicago, bringing the number of Mariano’s stores to 21. We are on schedule with the remaining eight acquired and organic openings this year.”

    Competitive Pressures

    During Q1, Roundy's "continued to see softness in our core markets," Mariano continued. "Competitive pressure, weak economic growth and weather related issues affected our core markets in the quarter. Despite difficult same-store sales comparisons in the first quarter, we remain steadfast with our Milwaukee market renewal initiatives as we continue to implement strategic changes in select core markets.”

    Roundy's announced yesterday that the company is withdrawing from the Minneapolis/St. Paul market with the sale of its Twin Cities-area Rainbow stores. Supervalu Inc., Lund Food Holdings and several independent grocers are acquiring 18 Rainbow stores for $65 million; Roundy's is actively seeking buyers for its nine remaining stores there.

    Q1 net sales just topped $1 billion, compared to $983.5 million for the year-ago quarter. Roundy's blamed the period's decline in same-store sales on an 8 percent decrease in customer transactions, partially offset by a 3 percent increase in average transaction size, plus the calendar shift of Easter into Q2 this year. "In addition, same-store sales continue to be negatively impacted by competitive store openings and the weak economic environment in the company’s core markets," the company reported.

    Q1 gross profit increased 3.1 percent to $270.7 million, from $262.5 million in the same period last year. Operating and administrative expenses increased to $254.9 million, from $235.8 million a year ago. Adjusted net income in Q1 was $500,000, or 1 cent adjusted diluted net earnings per common share, compared to $8.6 million, or 19 cents, in Q1 2013.

    During Q1, the company completed a public offering of 10,170,989 shares of its common stock at a price of $7 per share, which included 2,948,113 shares sold by Roundy’s and 7,222,876 shares sold by existing shareholders. The company received $19.3 million in net proceeds, used for general corporate purposes, including funding working capital and operating expenses as well as capital expenditures related to the 11 Dominick’s stores acquired from Safeway Inc. during the fourth quarter of 2013.

    Founded in Milwaukee in 1872, Roundy’s operates 169 retail grocery stores and 114 pharmacies under the Pick ’n Save, Rainbow, Copps, Metro Market and Mariano’s retail banners in Wisconsin, Minnesota and Illinois.

    By Jim Dudlicek, EnsembleIQ
    • About Jim Dudlicek As editorial director of Progressive Grocer, Jim Dudlicek oversees daily operations of the magazine, spearheads its signature features, produces PG’s monthly Trend Alert newsletter on center store issues, moderates its regular webcast series, and writes and comments about a wide range of grocery issues. A food industry journalist since 2002, Jim came to PG in June 2010 after covering the dairy industry for 7½ years, during which time he served as chief editor of Dairy Field and Dairy Foods magazines. A graduate of Marquette University, Jim is fascinated by how truly progressive grocers inspire consumers to enjoy food, transforming the industry from mere merchants into educators that can take the most basic of all necessities and turn it into something profound and life-enhancing. Follow him at www.twitter.com/JimDudlicek

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