US: Roundy's cuts FY forecast on tough Q2 sales

By Chris Mercer | 10 August 2012

Half-year net profits jump by 25% to $26.5m
Net sales rise by 2% to $1.9bn
Grocer cuts guidance after Q2 same-store sales drop by 3%

US food retailer Roundy's Inc has cut its full-year profits guidance after seeing weak consumer confidence lead to worse-than-expected sales in its fiscal first-half.

For the 26 weeks to the end of June, Roundy's net sales rose by 2% versus the 26 weeks to 2 July 2011, reaching US$1.9bn. The US Midwest-based grocery group reported a 25% jump in net profits over the half-year period, to $26.5m.

However, the increases proved slower than the firm anticipated. It said today (10 August) that it now expects same-store sales for the full-year to fall by between 2% and 3%, versus a previous prediction of a 0.5% to 1.5% drop.

The group also cut its guidance for fully diluted earnings per share, which are now set to be between $0.91 and $1.05. After the first quarter, Roundy's predicted a range of $1.11 to $1.22.

"Our second quarter results reflect the ongoing effects of a challenging economic environment on our business and our consumers,” said Robert Mariano, Roundy’s chairman, president and CEO. “Our top line results were constrained by an increasingly price-conscious consumer and greater than anticipated pricing and promotional activity in several of our major markets."

Second-quarter net sales rose by 1.7% to $996.8m, with new store sales offsetting a 3.3% drop in like-for-like store sales. Still, net profits for the quarter rose by almost 7%, to $18.9m.

Despite the disappointing second quarter, Mariano said the group is pleased with progress at its Chicago stores. The firm said new stores should enable net sales to rise by between 1% and 2% over the full-year, even though same-store sales are likely to fall.

Show the press release

Roundy’s, Inc. Reports Second Quarter 2012 Financial Results

MILWAUKEE--(BUSINESS WIRE)--Roundy’s, Inc. (“Roundy’s”) (NYSE: RNDY), a leading grocer in the Midwest, today reported financial results for the second quarter ended June 30, 2012.

“Our second quarter results reflect the ongoing effects of a challenging economic environment on our business and our consumers”

Net sales increased 1.7% to $996.8 million for the second quarter
Net income grew 6.6% to $18.9 million, or $0.42 diluted earnings per common share, for the second quarter
Adjusted EBITDA decreased 7.6% to $60.3 million for the second quarter

“Our second quarter results reflect the ongoing effects of a challenging economic environment on our business and our consumers,” said Robert Mariano, Roundy’s chairman, president and chief executive officer. “Our top line results were constrained by an increasingly price-conscious consumer and greater than anticipated pricing and promotional activity in several of our major markets. While these headwinds were worse than we expected in the quarter, we continue to be pleased with the strength in our Chicago area stores and the growing traction of our perishable, organic and own brand product offerings. As we look ahead, we believe that the economic and competitive conditions are likely to remain difficult for the second half of the year and consequently we are reducing our expectations for the year. We will continue to defend our local market leadership and are introducing a number of pricing and promotion initiatives focused on providing customers with high quality products at compelling values.”

Financial Results for Second Quarter of 2012

Net sales for the second quarter of 2012 were $996.8 million, an increase of $16.4 million, or 1.7%, from $980.4 million for the second quarter of 2011. The increase primarily reflects the impact of new stores, partially offset by a 3.3% decrease in same-store sales. The same-store sales decrease was primarily due to a 3.2% decrease in the number of customer transactions. Average transaction size in the second quarter 2012 was unchanged from the second quarter 2011. Same-store sales comparisons were negatively impacted by increased weakness in the consumer environment as a result of the soft economy and the increased effect of competitive store openings and related pricing and promotional activity in certain markets. In addition, the timing of the 2012 July 4^th holiday negatively affected same store sales by shifting more sales into the third quarter than during the comparable prior year quarter.

Gross profit for the second quarter of 2012 increased 1.1% to $267.7 million, from $264.7 million in the second quarter of 2011. Gross profit as a percentage of net sales was 26.9% for the second quarter of 2012, compared to 27.0% in the second quarter of 2011. The decrease in gross profit as a percentage of net sales primarily reflects price and promotional investments in certain markets and increased shrink, partially offset by improved efficiencies in the Company’s supply chain operations.

Operating and administrative expenses for the second quarter of 2012 increased to $224.0 million, from $216.9 in the same period last year. Operating and administrative expenses as a percentage of net sales increased to 22.5% in the second quarter of 2012, from 22.1% in the same period last year, due to increased occupancy costs related to new and replacement stores, incremental costs related to being a public company and reduced fixed cost leverage in the Company’s core business resulting from lower same store sales.

For the second quarter of 2012, net income was $18.9 million, or $0.42 diluted earnings per common share, compared to $17.7 million, or $0.58 diluted earnings per common share, for the second quarter of 2011.

Adjusted EBITDA for the quarter ended June 30, 2012 was $60.3 million, compared to $65.2 million in the second quarter of 2011. The decrease was primarily due to the effect of a more challenging economic and competitive environment, which resulted in lower same-store sales and reduced fixed cost leverage, as well as lower gross margins.

The Company did not open any new stores during the second quarter of 2012 but expects to open three new stores and relocate one store during the second half of 2012.

Net cash provided by operating activities for the second quarter 2012 was $39.7 million, compared to $74.5 million during the second quarter 2011. The decrease in cash from operating activities was due primarily to the higher use of cash for working capital in 2012 which was primarily due to the timing of payments for inventory and accounts payable.

The Company paid a dividend of $0.23 per share on all outstanding shares of its common stock during the second quarter. The Company currently intends to declare its next dividend of $0.23 per share at its board of directors’ meeting in mid-August.

Year-to-Date Financial Results

Net sales were $1,935.1 million for the twenty-six weeks ended June 30, 2012, an increase of $38.7 million, or 2.0% from $1,896.4 million for the twenty-six weeks ended July 2, 2011. The increase primarily reflects the impact of new stores, partially offset by a 2.7% decrease in same-store sales. The same-store sales decrease was due to a 2.0% decrease in the number of customer transactions and 0.7% decrease in the average transaction size. The Company’s same-store sales were negatively impacted by the effect of competitive store openings during the last twelve months as well as a more challenging economic and competitive environment. Same-store sales were also affected by calendar shifts, including the New Year’s holiday, which is traditionally a slow sales day and fell in the first quarter of 2012 and the July 4^th holiday, which shifted more sales into the third quarter this year.

For the twenty-six weeks ended June 30, 2012 net income was $21.2 million, or $0.51 diluted earnings per common share, compared to $26.5 million, or $0.87 diluted earnings per common share, for the twenty-six weeks ended July 2, 2011. Adjusted net income for the twenty-six weeks ended June 30, 2012 was $29.5 million, or $0.71 diluted earnings per common share, compared with $26.5 million, or $0.87 diluted earnings per common share for the twenty-six weeks ended July 2, 2011. Adjusted net income for the current year-to-date period excludes an $8.4 million after-tax charge, or $0.20 per diluted common share, for the early extinguishment of debt and one-time IPO expenses that occurred during the first quarter 2012.

Adjusted EBITDA for the twenty-six weeks ended June 30, 2012 and July 2, 2011 was $109.0 million and $116.1 million, respectively.

Fiscal 2012 Guidance

The Company updated its guidance for fiscal 2012. The following table provides information on the Company’s current estimated 2012 results:

Sales growth		1.0% to 2.0%

Same-store sales growth		(3.0%) to (2.0%)

Adjusted EBITDA		$200 to $210 million

Adjusted EBITDA Margin		5.1% to 5.4%

Interest Expense⁽¹⁾		$50.5 to $51.5 million

Income Tax Rate		39.5% to 40.0%

Capital Expenditures		$65 to $70 million
New Store Openings		4
Replacement Store Openings		2

Weighted Average Diluted Common Shares Outstanding⁽²⁾		43.4 million

Earnings per Share
Fully Diluted		$0.91 to $1.05
Excluding One-Time Transactional Costs⁽³⁾		$1.10 to $1.24

(1)		Includes non-cash interest of approximately $2.5 million and $1.3 million related to amortization of deferred financing fees and original issue discount, respectively.
(2)		Represents the weighted average diluted common shares outstanding for the full year, consisting of 38.6 million shares in the first quarter, 45.0 million shares in the second and third quarters and 45.1 million shares in the fourth quarter.
(3)		Presented to exclude expenses of approximately $13.8 million ($8.4 million, or $0.19 per share (based on estimated weighted average diluted common shares outstanding for the full year), net of income tax expense) incurred in connection with the debt refinancing and IPO in February 2012.

Conference Call

The Company will host a conference call and audio webcast today, August 9, 2012 at 4:30 p.m. ET (3:30p.m. CT) to discuss financial results for the second quarter fiscal 2012. To access the conference call, participants should dial (888) 790-3727; passcode is 5627188. Participants are encouraged to dial in to the conference call ten minutes prior to the scheduled start time. The call will be also broadcast live over the Internet and accessible through the Investor Relations section of the Company’s website at www.roundys.com, where it will be archived and accessible through August 23, 2012. A telephone replay will be available through August 23, 2012 by calling (866) 351-5764 to access the playback.

About Roundy’s

Roundy’s is a leading grocer in the Midwest with nearly $4.0 billion in sales and more than 18,000 employees. Founded in Milwaukee in 1872, Roundy’s operates 159 retail grocery stores and 98 pharmacies under the Pick ’n Save, Rainbow, Copps, Metro Market and Mariano’s Fresh Market retail banners in Wisconsin, Minnesota and Illinois.

Original source: http://www.businesswire.com/news/home/20120809006163/en/Roundy%E2%80%99s-Reports-Quarter-2012-Financial-Results

Sectors: Financials, Natural & organic, Private label, Retail