Weis Markets, Inc. 2021 Q3 Form 10-Q Summary
Business Context and Reporting Period
Weis Markets, Inc. operates 197 supermarkets with approximately 24,000 associates in Pennsylvania and six surrounding states. The company reports one operating segment and sells groceries, pharmacy products, fuel, manufactured products and general merchandise. This unaudited Form 10-Q covers the 13 and 39 weeks ended September 25, 2021, compared with September 26, 2020.
Financial Results and Key Metrics
| Metric | 13 Weeks Ended September 25, 2021 | 13 Weeks Ended September 26, 2020 | 39 Weeks Ended September 25, 2021 | 39 Weeks Ended September 26, 2020 |
|---|---|---|---|---|
| Net sales | $1,063.5 million | $1,002.4 million | $3,117.1 million | $3,086.9 million |
| Gross profit | $283.1 million | $274.3 million | $831.7 million | $831.4 million |
| Gross margin | 26.6% | 27.4% | 26.7% | 26.9% |
| Income from operations | $39.0 million | $42.8 million | $116.4 million | $136.2 million |
| Operating margin | 3.7% | 4.3% | 3.7% | 4.4% |
| Net income | $28.5 million | $31.3 million | $86.2 million | $99.5 million |
| Net margin | 2.7% | 3.1% | 2.8% | 3.2% |
| Diluted EPS | $1.06 | $1.16 | $3.21 | $3.70 |
Net cash provided by operating activities was $182.1 million year to date, compared with $194.2 million in the prior-year period. Capital expenditures were $118.2 million, compared with $83.6 million, and net cash used in investing activities was $121.1 million. Dividends paid were $25.0 million in both periods. Cash and cash equivalents increased to $172.6 million from $136.6 million at December 26, 2020.
At September 25, 2021, total assets were $1.872 billion, total liabilities were $665.5 million and shareholders’ equity was $1.207 billion. Marketable securities totaled $117.5 million and SERP investments totaled $26.4 million. The company had an unsecured revolving credit facility with $25.3 million of availability, net of $4.7 million in letters of credit; the filing states that the company had not borrowed under the facility since the second quarter of 2018. Operating lease liabilities totaled $204.9 million.
Material Changes Versus the Prior Comparable Period
- Third-quarter sales increased 6.1%, while year-to-date sales increased 1.0%.
- Third-quarter comparable-store sales increased 4.6%, including fuel, and 3.2% excluding fuel. Year-to-date comparable-store sales decreased 0.1% including fuel and 1.4% excluding fuel.
- Fuel sales benefited from higher gasoline prices. Pharmacy sales increased due to prescription volume and COVID-19 vaccinations.
- Gross margin declined because pharmacy and fuel represented a larger portion of sales and because of higher product and supply-chain costs.
- Third-quarter operating income and net income each declined 9.0%. Year-to-date operating income declined 14.6% and net income declined 13.3%.
- Operating, general and administrative expenses increased 5.5% in the quarter and 2.9% year to date. Year-to-date increases included associate healthcare benefits, fixed expenses and utilities.
- Year-to-date operating cash flow declined $12.1 million, while capital expenditures increased $34.6 million.
- Weis 2 Go Online sales increased more than 15% year to date. Curbside pickup was available at 188 locations, Shipt home delivery at 177 locations and DoorDash delivery at 170 locations as of the filing date.
Guidance, Outlook, Risks and Unusual Items
Management planned approximately $150 million of capital expenditures for 2021 and expected operating cash flow and available credit capacity to fund working capital, capital expenditures, acquisitions, debt requirements and dividends. The company also expected to increase its marketable securities portfolio during the remainder of 2021.
The board declared a quarterly dividend of $0.32 per share payable November 22, 2021. Future dividends remain subject to quarterly board approval and the company’s results, financial condition and other relevant factors.
Management expects overall product costs to increase based on food-retail inflation indicators. Reported results remain affected by the COVID-19 pandemic and difficult comparisons with 2020 pandemic-related demand. Key disclosed risks include competition, inflation and supply-chain disruption, pandemic effects, cybersecurity and data privacy, investment and infrastructure risks, and legal or regulatory developments.
Year-to-date results included $2.0 million of non-cash LIFO inventory valuation expense, compared with $2.2 million in the prior-year period. Investment income and losses were also affected by changes in equity securities and SERP investments. The filing states that there were no material subsequent events requiring disclosure, no material changes in market risk and no material changes to internal control over financial reporting.
Important Facts for Investors to Verify
- Whether lower comparable-store sales excluding fuel and continued margin pressure persist after pandemic-related comparisons normalize.
- The effect of food inflation, labor and healthcare costs, fuel prices and supply-chain expenses on gross and operating margins.
- Actual 2021 capital expenditures versus the approximately $150 million plan and the resulting effect on free cash generation.
- The availability and terms of the revolving credit facility, including the $4.7 million of letters of credit and the September 2024 maturity.
- Whether digital fulfillment growth and the DoorDash partnership improve sales and profitability after delivery and fulfillment costs.
- The board’s continued declaration of quarterly dividends and any future share repurchases under the remaining authorization for 752,468 shares.