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Roundy’s Inc. experienced ups and downs during its third quarter, according to the Milwaukee-based grocer’s latest fiscal report: net sales are up, but so are losses.
Net sales were up 16.4 percent to $973.8 million in Q3, and the company reported a net loss for the quarter of $249.9 million on net income of $3.2 million. Q3 same-store sales dipped 2.7 percent, blamed on a 5.2 percent decrease in customer transactions offset by a 2.6 percent increase in average transaction size, due to “competitive store openings and the weak economic environment in the company’s core markets.”
The picture is not any more rosy for year to date, with net sales up about 11 percent and a net loss of $260 million.
‘Key Challenges in our Core Market'
“During the third quarter, we continued to focus on improving sales and operational efficiencies in our core business. While we still need to address key challenges in our core market, we believe the strategic initiatives we have in place facilitated progress during the quarter and will allow us to continue to improve,” said Robert Mariano, Roundy’s chairman, president and CEO. “We opened three additional Mariano’s stores during the quarter and we currently have a total of 29 stores in the Chicagoland area. We closed our Stevens Point distribution facility and we finalized the sale of certain Rainbow stores along with the closure of the remaining nine Rainbow stores. We will continue to focus on our goals of improving operational efficiency and delivering sustainable top-line growth to our business.”
While the company’s Mariano’s Fresh Market banner in the Chicago area continues to grow and flourish, it left the Twin Cities market with the sale of 18 Rainbow stores to local retailers and closure of nine other stores, and overall the company continues to struggle.
Gross profit in Q3 of 2014 increased 21 percent to $258.2 million, from $213.4 million in the same period last year. Gross profit as a percentage of net sales was 26.5 percent for Q3, compared to 25.5 percent a year ago. This primarily reflects reduced promotional spend, a benefit for the reduction in the LIFO reserve due to the disposition of inventory as a result of the closure of the Stevens Point distribution facility and an increased perishable sales mix, partially offset by increased shrink, including the effect of the higher perishable mix of Illinois stores and the start-up impact of new or acquired Illinois stores.
Operating and administrative expenses in Q3 increased to $248.4 million, from $197.7 million in the same period last year, and rose to 25.5 percent of net sales due to increased start-up labor costs and higher occupancy and labor costs in new or acquired Illinois stores.
Roundy’s recorded severance and other one-time charges of $1.8 million related to the closure of its Stevens Point warehouse during Q3; the company consolidated supply chain operations into its Oconomowoc distribution center.
As a result of leaving the Twin Cities market, Roundy’s recorded a pre-tax charge of $23.9 million during Q3, for the estimated multi-employer pension withdrawal liability related to the nine closed Rainbow stores.
Founded in Milwaukee in 1872, Roundy’s operates 148 retail grocery stores and 97 pharmacies under the Pick ’n Save, Copps, Metro Market and Mariano’s retail banners in Wisconsin and Illinois.