March 05--Shares of Mariano's parent company Roundy's jumped more than 10 percent late Wednesday after the grocery store operator reported better-than-expected fourth-quarter sales and its CEO came out swinging against growing rival Whole Foods.
Roundy's Chairman and CEO Bob Mariano said his company continues to face near-term challenges. Its issues in Chicago include that Mariano's recent rush of store openings is eating away at sales at some of its older stores. Meanwhile, rivals are opening more of their own stores, adding pressure in the already competitive market.
During Wednesday's conference call, analysts asked what impact Mariano's is feeling from Whole Foods Market's store openings as well as the natural and organic grocer's push to reduce produce prices. Mariano was quick to brush off comparisons between the chains.
"Let's be clear about something. Whole Foods is not an analog for Mariano's. Mariano's is a far more complete shopping experience than Whole Foods. So, you cannot do your complete shopping trip at a Whole Foods. You can at a Mariano's," Mariano said.
Overall, Roundy's sales perked up a bit at the end of 2014, aided by several new Mariano's stores. Roundy's conventional grocery stores are being hurt by competition from grocery stores to discount chains in its home market of Wisconsin.
For now, the Mariano's chain -- with its mix of prepared specialty foods and general groceries -- is only in the Chicago area. Mariano's has 30 stores in the Chicago market, up from 13 at the end of 2013, and five more are planned for 2015.
Two of Mariano's older locations, one at 3350 N. Western Ave. in Chicago and the other at 1720 N. Milwaukee Ave. in Vernon Hills, are seeing some shoppers switch to newer Mariano's stores nearby, Mariano said. That so-called cannibalization pushed sales at Mariano's stores open at least a year to be flat in the fourth quarter. Mariano's same-store sales would have been up in a mid-single digit percentage range were it not for that cannibalization, executives said.
Mariano stressed that those Chicago and Vernon Hills shoppers have not switched their trips to Whole Foods. Mariano's can track customers' spending through the chain's loyalty card.
"We know where they shop," Mariano said.
However, the company admits that rivals' store openings will likely put pressure on Mariano's sales this year.
Whole Foods has opened two stores in the market this year, with plans for five more.
"So far we have not been able to see any material effect of their two store openings," Mariano said. Still, he said the company expects competitors' store openings in 2015 to have an impact on same-store sales this year.
Roundy's held on to its expectations for a loss this quarter and this year. The company said the number of customer shopping trips declined but people spent a little more when they shopped.
Here's how the quarter played out and a bit of what's to come:
Fourth-quarter profit declined: Roundy's earned $6.1 million, down from $8.7 million a year earlier.
Excluding a variety of items, it earned $3.5 million, or 7 cents per share, down from $5.8 million, or 13 cents per share. The adjusted results exceeded Roundy's November forecast, which called for adjusted per-share results ranging from a loss of 1 cent per share to a profit of 6 cents per share.
Sales: Fourth-quarter sales from continuing operations soared 26.1 percent to nearly $1.08 billion.
Same-store sales from continuing operations fell 2.3 percent.
Roundy's had forecast sales of $1.06 billion to $1.07 billion, with same-store sales down 2.6 percent to 3.6 percent.
Market reaction: Shares of Roundy's jumped 51 cents to $4.53 in after-hours trading. The shares fell a penny during regular trading hours, before the company's report.
Outlook: Roundy's repeated its January forecasts. The company projects a first-quarter loss from continuing operations of nil to 5 cents per share. It still anticipates first-quarter sales of $980 million to $990 million with same-store sales set to fall 0.25 percent to 1.25 percent. It also still expects a fiscal 2015 loss from continuing operations of 7 cents to 18 cents per share, with sales of $4 billion to $4.08 billion and same-store sales set to decline 0.75 percent to 2.75 percent.
jwohl@tribpub.com
