Village Super Market, Inc. — Q3 FY2022 Form 10-Q
Business and period: Village operates ShopRite, Fairway Market and Gourmet Garage supermarkets and is a major member of Wakefern, its principal supplier. The quarter comprised 13 weeks ended April 30, 2022; year-to-date results cover 39 weeks. Village opened a 14,600-square-foot Gourmet Garage in Manhattan on April 29, 2022.
Key financial results
| Metric | 13 weeks ended Apr. 30, 2022 | 13 weeks ended Apr. 24, 2021 | 39 weeks ended Apr. 30, 2022 | 39 weeks ended Apr. 24, 2021 |
|---|---|---|---|---|
| Sales | $501.962m | $481.093m | $1,533.581m | $1,494.047m |
| Gross profit / margin | $141.591m / 28.21% | $133.422m / 27.73% | $431.382m / 28.13% | $413.230m / 27.66% |
| Operating income (loss) | ($4.290m) | $3.848m | $20.936m | $15.337m |
| Net income (loss) | ($3.231m) | $2.574m | $14.227m | $10.490m |
| Operating cash flow | Not presented quarterly | Not presented quarterly | $51.702m | $32.995m |
Quarterly sales increased 4.3%; same-store sales rose 4.6%. Year-to-date sales increased 2.6% and same-store sales rose 3.7%. Sales growth reflected New York City store performance, inflation and higher SNAP benefit redemptions; increased transaction counts were partly offset by smaller baskets. Same-store digital sales were flat year over year. On a two-year stacked basis, same-store sales decreased 1.6% for the quarter and increased 6.0% year to date.
Gross margin expanded 0.48 percentage points in the quarter and 0.47 points year to date, mainly from improved departmental margins. The quarter’s $12.296m pension settlement charge drove the GAAP operating loss. Excluding specified items, management reported adjusted net income of $5.285m for the quarter versus $2.297m, and $22.743m year to date versus $10.213m. These are non-GAAP measures; the filing cautions they are not substitutes for GAAP results.
Liquidity, debt and capital allocation
- Cash and cash equivalents were $119.915m at April 30, 2022. Working capital was $72.340m, with a 1.47 current ratio. The working-capital increase from fiscal year-end mainly reflects $28.262m of Wakefern notes receivable reclassified to current assets.
- Year-to-date operating cash flow was $51.702m; investing cash use was $38.790m, including $36.834m of capital expenditures; financing cash use was $9.311m. Cash increased $3.601m from July 31, 2021.
- Debt excluding lease obligations totaled $75.639m, of which $7.466m was current. Separate balance-sheet lease obligations totaled $326.733m ($304.434m operating and $22.299m finance). The company had a $75m revolving line within its $150.5m credit facility; $7.336m of letters of credit were outstanding. It reported compliance with credit covenants.
- Village paid $9.787m in dividends year to date. Management expected fiscal 2022 capital expenditures of approximately $55m and said cash, operating cash flow and credit-facility resources should cover foreseeable requirements.
Material changes, outlook and risks
- Village terminated its employees’ defined-benefit pension plan in April. It paid $1.485m to fully fund the plan, distributed or annuitized participant benefits, and recorded a $12.296m pre-tax settlement charge, including $10.811m of non-cash recognition of prior actuarial losses. No obligation or plan assets for that plan remained at quarter-end.
- Management forecast fiscal 2022 same-store sales growth of 3.25%–4.25%, capital expenditures of about $55m, and an effective tax rate of 30.5%–31.5%. It intended to continue quarterly dividends at $0.25 per Class A share and $0.1625 per Class B share. These are forward-looking expectations, not guarantees.
- Village entered a 30% partnership for an Old Bridge, New Jersey retail center that includes a replacement store. Its estimated project costs are $15m–$20m over two to three years; $4.393m had been invested, and future lease obligations of $9.280m were disclosed.
- Key risks include intense competition and narrow grocery margins; inflation, labor shortages and wage pressure; COVID-related and supply-chain uncertainty; Fairway’s underperformance amid reduced Manhattan commuter and tourist traffic; dependence on Wakefern for merchandise, services and financial balances; collective-bargaining exposure (about 89% of employees are covered); pension-plan funding and withdrawal risks; and cybersecurity, food-safety, insurance and impairment risks. Management said ordinary-course litigation was not expected to materially affect results or liquidity.
Important facts for investors to verify
- Whether reported same-store growth is sustainable as inflation, transaction counts and basket sizes change.
- How much of the GAAP-to-adjusted earnings difference reflects the pension termination charge, and whether other adjustments recur.
- Fairway’s operating progress and the effect of Manhattan traffic and population trends.
- Execution, funding and returns for the projected capital program and Old Bridge development, alongside debt and lease commitments.
- Exposure to Wakefern, including the concentration of cash deposits and notes receivable, and the terms and maturity of those balances.