Less than a week after its annual shareholders meeting late last month, Weis Markets released its first quarter financials (for the 13-week period ended March 26), and its results continued the regional chain’s recent pattern of strong sales and earnings.
Net sales totaled $1.1 billion in Q1, compared to $1.0 billion for the same period in 2021, up 9.7 percent. First quarter comparable store sales increased 9.4 percent on an individual year-over-year basis (accelerating sequentially from the fourth quarter 2021 increase of 6.9 percent) and increased 10.8 percent on a two-year stacked basis.
Weis’ first quarter net income totaled $31.4 million compared to $24.3 million in 2021, up 29.4 percent. First quarter earnings per share totaled $1.17 compared to $0.90 per share for the same period in 2021.
“We continued to build on our momentum in the first quarter, when we generated strong comparable store sales and net income increases. Despite significant inflationary pressures, we were able to maintain stable gross profit margins and effectively manage expenses,” said Weis. “These results reflect the hard work and dedication of associates at every level of our company. They have helped us navigate the challenges of a pandemic-impacted marketplace while generating first quarter results that exceeded last year’s performance and our current year expectations.”
The sales and earnings growth at Weis is not a new story, but it’s one that has been somewhat under the radar. Despite being a publicly-traded company (where its stock has increased in value by 50 percent over the past year), the regional chain has always opted to maintain a low profile. It’s a formula that’s been successful for them, but also hinders the company from revealing more about its talented management team and strong overall corporate culture.
They deserve the credit that they’ve fully earned.
Wegmans Coming To LI With Lake Grove Store; Opens First Of Three Mid-Atlantic Units In 2022
In the last two months, Wegmans announced that it will enter two markets where the uber-merchant has long clamored to open stores.
On March 1, the Rochester-based retailer announced it will open its first store in Connecticut – a 95,000 square foot two-level stores in the affluent town of Norwalk that may not open until 2025.
Then on April 26, Wegmans said it will expand its overall New York Metro presence with a new unit slated for Lake Grove, NY, marking what will be the family-owned company’s first unit on Long Island.
Lake Grove seems like an ideal site for the high-volume operator with an annual median income of $135,000 in a village located 50 miles from New York City in Suffolk County, near Smithtown.
Wegmans said that it has acquired 8.5 acres in the DSW Plaza at the junction of Middle Country Road and Moriches Road and intends to build a 100,000 square foot supermarket on that site. No opening date was provided, but after analyzing the regional chain’s upcoming new store opening dates, a 2024 or 2025 debut seems likely.
While the 28-acre shopping center is the same one that housed the former Fairway Market unit (which closed in 2016), it will not be on the same specific site.
“Wegmans will be such a positive addition to our village, as it will help rejuvenate all of the retail in the area. The company has a reputation that will bring folks near and far into Lake Grove to do their shopping,” said Mayor Robert Scottaline. “We are so excited to welcome Wegmans to our beautiful village. We look forward to working together to make a positive impact in the community.”
Although the 107-store chain promises to be a disruptive factor when it opens in Lake Grove, it will enter a marketplace that’s already competitive. Whole Foods Market, Trader Joe’s and Costco (all among the highest sales-per-square-foot merchants in the business) operate stores less than a mile from the planned Wegmans location, while Walmart operates two discount stores within four miles of the Lake Grove site (in Centereach and Setauket). Long Island market leader Stop & Shop’s nearest store is 2.6 miles away in South Setauket, while traditional supermarket competitor ShopRite’s closest store is in Lake Ronkonkoma about four miles from the planned Wegmans unit. BJ’s also operates a high-volume club store 4.5 miles away in Setauket.
Before the debuts of the Lake Grove and Norwalk units, Wegmans will open its second New York City unit next year, an 82,000 square foot two-level supermarket at 770 Broadway (Astor Place) in Lower Manhattan, the site of a former Kmart store. The company’s first NYC store opened in 2019 in Brooklyn.
And earlier this month, Wegmans kicked-off its 2022 store expansion effort with a new 81,300 square foot store in the Carlyle section of Alexandria, VA, the first of three new stores that are scheduled to have ribbon cuttings this year. The Carlyle unit is Wegmans’ second store in demographically favorable Alexandria.
The store employs about 450 associates and features a two-level underground garage that has 500 parking spaces. It is part of a new mixed-use development called Carlyle Crossing that will feature three apartment communities as well as additional retail shops. Mike Anthony, who has been with Wegmans since 2006, is the store manager, serving in his first store leadership role. Most recently he served as perishables manager for the company’s Virginia Beach store which opened in 2019.
Then on July 13, Wegmans will debut its first-ever Washington, DC store at the site of the former Fannie Mae complex on Wisconsin Avenue NW. That 84,000 square foot unit will be part of a new 10-acre mixed-use development called City Ridge. Like the new Alexandria unit, the DC Wegmans will be located at ground level with parking below and residences above the store. Kevin Russell, a 35-year veteran of the Rochester, NY-based merchant, will serve as store manager. He most recently managed the Wegmans store in Tysons Corner, VA, beginning when it opened in late 2020.
Finally, sometime this fall (no opening date has yet been announced), the company will open its first store in the state of Delaware in the tony Greenville area of Wilmington. While the new 84,000 square foot store will also be part of a mixed-use development, the Wegmans supermarket itself will be more like most other Wegmans that are freestanding, with parking in front of the store. The other commercial retail and residences in the Barley Mill Plaza development will be adjacent to but separate from the supermarket anchor. Wegmans veteran Jared Fedor will be the store manager at the new Greenville location.
The “Wegmans Express” continues to roll along.
‘Round The Trade
I believe there’s reason to be concerned with recent Q1 financial reports from the nation’s two largest mass merchants – Walmart and Target – which both posted solid sales gains but saw earnings plummet noticeably. Actually, Target’s profits sank. The Minneapolis retailer, while posting a solid 3.3 comp-store revenue gain, saw net earnings dip from $2.1 billion in last year’s first quarter to $1.01 billion for the period ended May 1. Moreover, gross margins dipped more than 400 basis points from 30.9 percent to 26.7 percent. “Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time,” Target CEO Brian Cornell stated. Among those “factors” Cornell noted was the stress of dealing with the continued supply chain dysfunction. At rival Walmart, the trend was the same although earnings were somewhat better. Comp store sales at its U.S. units grew 1.8 percent and profit dropped, too, but by only 87 basis points to a still very healthy $5.3 billion for the period ended April 29. Strong grocery sales provided the biggest boost to the Bentonville, AR chain’s overall sales. At a call with financial analysts following the sales and earnings report release, CEO Doug McMillon was none too pleased, explaining, “We’re not happy with the profit performance for the quarter.” Later on during the call the 55-year old leader said, “The rate of inflation in food pulled away more dollars in GM than expected,” while noting that he’s witnessed some trading down on grocery from national brands to private label. He added that heightened food inflation has become a persistently thorny issue for the world’s largest merchant and biggest food retailer. “I’m concerned that inflation may continue to increase,” McMillon proclaimed. Predictably, for the first time since COVID pandemic began to impact people’s lives and businesses nearly 30 months ago, we’re seeing a few cracks in the record breaking profit performances of industry leaders. While sales have not yet been adversely impacted, that day may not be far off. And while Cornell and McMillon did not address the issue directly, there’s a growing feeling among retailers that manufacturers are taking price increase liberties beyond the supply chain difficulties which are real and painful for everybody. “Of course, labor and transportation costs have spiraled and production remains impacted to a degree because of continued labor shortages and some challenges with raw materials and commodities. But at the rate we’re seeing these price increases hitting us monthly – and we’re not talking about nickels and dimes – my belief is that some suppliers are gilding the lily,” said a senior VP-merchandising at one of the Northeast’s largest retailers. We talked to 10 other retailers and all agreed with that statement to differing degrees…although generally happy times remain on the sales and earnings front, you can feel an increasing sense of frustration is approaching. To wit, the U.S. Bureau of Labor Statistics (BLS) said that based on a year-over-year comparison, overall consumer prices once again topped the 8 percent mark (8.3) in April. What’s scarier is that food price inflation increased to 10.8 percent. A closer examination revealed that meat, poultry, fish and eggs rose 14.3 percent; bread was up 9.1 percent (and likely to become more expensive when the negative impact of the Ukrainian wheat supply impacts U.S. prices); and milk prices increased 14.7 percent.
And according to the latest online grocery sales trends published by digital research firms Brick Meets Click and Mercatus, online sales are also dropping. According to the survey, on a year-to-year basis, online sales decreased 5.8 percent with the grocery delivery segment suffering the biggest hit with a drop of 11 percent compared to 2021. As expected, based on recent trends, pickup/curbside service was down only 3 percent. Of course, you would expect a dip in revenue versus a year ago when COVID was much more prevalent. But it’s interesting to see how consumers have clearly shifted their online preferences toward store pickup rather than home delivery, at least for food products. Or as another of my grocery industry retail friends cynically put it: “That’s encouraging – now we’re only losing $2 an order instead of $6.” There was some mildly good news on the national employment front to report. According to the BLS, there were nearly 24,000 new food and beverage jobs and more than 55,000 new jobs in the manufacturing sector added last month. However, the big labor picture remains disappointing with only a 62.2 percent overall labor force participation.
Shockingly, there’s more Amazon news to report and it’s not that encouraging. “Godzilla” has or will close six underperforming Whole Foods Markets. The stores are located in Brookline, MA; Montgomery and Mobile, AL; Tarzana, CA; and Chicago (two locations). Five of those units closed in early May, only the WFM in Chicago’s underserved Englewood neighborhood remains open, but not for long. These closures come on the heels of Amazon’s recent decision to close its bookstores and 4-Star general merchandise shops. And on the balance sheet, things proved somewhat difficult for the Seattle-based juggernaut, too, as it reported it lost $3.8 billion in its first quarter (compared to a profit of $8.1 billion in the corresponding period last year), its first quarterly loss since 2015. And, the company is warning that Q2 earnings could also show an earnings loss (Q2 profits in 2021 were $7.7 billion). And even though sales increased 7 percent to $116.4 billion, that gain was Amazon’s weakest revenue result in almost 20 years. Of course, there were bright spots in “Godzilla’s” vast portfolio. Its “clean-up hitter,” Amazon Web Services, posted Q1 sales of $18.4 billion (a 37 percent increase) and its Prime membership cash cow unit took in $8.4 billion, a gain of 11 percent (helped by a $20 subscription cost increase that went into effect earlier this year). Don’t cry for me, Jeff Bezos!
Some sales numbers to report, this time from the club store channel. Costco continued its impressive revenue run, posting a 13.9 net sales increase in April to $17.3 billion at its 573 U.S. stores. Same store sales (ex-fuel) again were at the high end of the spectrum (when measured against all other retailers that sell food) at 8.1 percent in the U.S. E-commerce revenue in the U.S. also increased to a healthy 6.2 percent. Traffic at its 829 club stores globally increased 4.9 percent and the average customer transaction also grew by 7.3 percent. And those strong numbers were achieved with one fewer shopping day because of the shift of Easter.
At rival BJ’s, both sales and earnings were also stellar during its first quarter which ended April 30. The Westborough, MA-based discounter posted an impressive overall sales increase of 16.3 percent and a comp store gain of 4.1 percent (ex-fuel) for the period. Profit also jumped from $82.6 million in the comparable period last year to $112.5 million in Q1. BJ’s also benefited from a record increase in membership income which grew by 11.9 percent to $96.6 million in the quarter. I think CEO Bob Eddy summed it best when he stated: “These are turbulent economic times. Inflation is continuing. Gasoline prices are high, and last year’s stimulus benefits are winding down. In light of all this we have continued to invest in our value proposition. In fact, our internal competitive-prices benchmark shows our pricing positions have improved over the past few quarters. A good example is our signature rotisserie chicken, which at $4.99 maintains industry-leading pricing despite robust inflation impacting this item. We made similar investments in select categories such as paper and water, which we know are key member value items. These are the times that our business and the club industry overall was made for. When consumer wallets are pressured, they search for value. When they search for value, they come to us. We believe we are well-positioned for the future.” During Q1 BJ’s opened its first club “concept” store, a 43,000 square foot unit in Warwick, RI that is less than half the size of its typical model and will serve as a learning lab for the company where it can test assortments, displays, product demos and convenience initiatives and then apply those lessons across a broader portfolio. The discounter also completed its acquisition of four perishables distribution centers from Burris Logistics during Q1.
FMI has named the winners of its 2022 store manager of the year awards and that group includes Stephanie Wright from the Monadnock Food Co-op in Keene, NH (for retailers operating between 1 and 49 stores); Raymond Stockard, K-VA-T/Food City for his store in Kingsport, TN (50-199 stores); Rob Vassar, store manager at Meijer’s unit in Stevensville, MI (200+ stores): and international winner Dawn Haig, who manages a Save-On-Foods unit in Chilliwack, British Columbia. Kudos to the champs!
Instacart began the process of potentially becoming a publicly-traded company when it filed a confidential statement with the SEC, a possible first step to launch an IPO. The advantage of going the confidential statement route is that it allows regulators to review a company’s future plans without disclosing those details publicly. The next step, if it opts to become “public,” is to file an S-1 form which would reveal more details. Analysts believe this may be a challenging time to go forward with an IPO because of Instacart’s recent market cap devaluation (from $39 billion to $24 billion) and the current inflationary cycle which has diminished the stock values of many firms. However, that day of reckoning is clearly coming for Instacart and when it happens retailers will rue the day they shared so much data with a company which sounds more and more like it will soon become a full-fledged competitor.
Local Notes
That’s a Bingo! (sorry, for the bad “Inglorious Basterds” reference). I’m referring to Bingo Wholesale, the warehouse-style Kosher discounter which plans on opening its fourth store next spring in Inwood, NY at the site of an old 61,699 square foot Stop & Shop store in that Long Island community. Bingo Wholesale, which debuted in Brooklyn in 2016, is owned by Israeli supermarket chain Osem Ad which operates 20 stores in Israel. The company’s other stores – in Lakewood, NJ and Monsey, NY – are located in heavily Jewish populated areas where many residents devoutly follow traditional Jewish dietary laws.
We have some more store openings and “ground breakings” to report. Gourmet Garage, the Manhattan-based upscale merchant, recently opened its fourth NYC unit on Hudson Street in the West Village (the site was formerly occupied by the short-lived natural and organics retailer Mrs. Green’s). Gourmet Garage, which was founded in 1992, is now owned by Village Super Market (Sumas family), the second largest Wakefern member, which acquired the niche operator in October 2019 marking Wakefern’s first retail entry into Manhattan. Five months later, Village expanded its Manhattan presence when it acquired five Fairway Markets, four of which were in New York City’s wealthiest borough.
Another large Wakefern member – Zallie’s – last month broke ground on a new 75,000 square foot ShopRite unit located in Woolwich Township (Gloucester County), NJ. This will be the 12th store owned by the Zallie family, which David Zallie (son of the late George Zallie Sr., an iconic leader) serves as president. It is expected to open next March.
Lidl broke ground late last month on what will be its largest and initial “from the ground up” discount store in Deer Park, LI (Suffolk County). The 35,359 square foot unit will be the German discounter’s 22nd Long Island store and is expected to open early in 2023.
On a related new store note, I finally visited the 80,000 square foot Market Basket unit that opened in March in Hanover, MA. What a throwback (and I mean that in a good way)! Hundreds of cars in the parking lot, busy aisles where product was continually being restocked by a plethora of clerks; department managers actually on the floor to greet and help customers; and much better in-stock conditions (over 80 percent) than the typical retail food store. Clean, busy and buzzing – that’s the way supermarketing used to be (and ought to be!).
As I continue to age ungracefully, I’m noticing that I’m writing more often about the retirements of industry friends and peers. We’ve got three to add to that list this month including that of Kevin Small, VP-construction and development for Weis Markets. I’ve known Señor Small for 25 years dating back to when he oversaw store development during their halcyon years under the dynamic leadership of Bill White. In 2007, he left a then-driftless Shoppers organization that was being treated as a red-headed stepchild (pardon the political incorrectness) by then-parent Supervalu and moved to Weis where he has helped lead the regional chain to halcyon days of its own. A true professional with a calming demeanor and a wry sense of humor, Kevin has my wishes for all the best with his future endeavors.
Also calling it a career are two Wegmans executives whose contributions have been essential to the uber-retailer’s growth. Ralph Uttaro, the Rochester, NY-based regional chain’s senior VP of real estate and development, retired on May 6 after 38 years with the company. Ralph was a very low key-leader but his knowledge and skill set about real estate and construction were indisputable. He was truly one of the primary reasons why Wegmans has been able to successfully expand into so many new markets over the past 25 years. Ralph was the catalyst in finding those sites and working with local developers to make those 100,000 square foot floor plans a reality.
And our buddy Marty Gardner is also packing it in after 40 years with Wegmans. Marty began his career as a night manager at the company’s Lyell Avenue store in 1982 and has held many operations and merchandising jobs for the company, culminating with his promotion to senior VP-merchandising in 2003. I can attest that as good as a chief merchant as he has been for nearly 20 years, he’s even a better person. Kind, smart, polite and generous are the first words that come to mind – you can easily see how the one-time store manager has had a sensational career with one of the best retailers in the U.S. Good luck, my friend. Taking over Marty’s old post is Tom DiNardo, who will be adding these substantial duties to his current role as VP-marketing. Tom’s an excellent choice with a 30-pound brain to compliment his tireless work ethic and strong people skills.
On the other end of the PSQ (People Skills Quotient) lies Larry “The Milkman” Johnston, former CEO of Albertsons. We thought the “The Milkman” had faded into the pages of oblivion but, alas, he has returned from the proverbial dead to acquire a major stake in a company called the Peach Cobbler Factory Franchise. The Louisville, KY-based firm bills itself as “one of America’s fastest growing dessert franchises” (Johnston must have coined that tagline) and the 73-year old former overpaid corporate executive, who parlayed a career as a senior leader at General Electric into the Albertsons top job in 2001 said, “I am excited to be partnering with Greg George and the Peach Cobbler team of associates in accelerating the company’s rapid growth and success forward into the future.” If I were Mr. George, I’d start keeping an eye on expenses immediately.
In its continuing effort to consolidate itself into a totally integrated self-distribution chain, Ahold Delhaize USA has announced that it successfully added the former C&S Wholesale ES3 facility in York, PA into its system, effective May 1. At 1.2 million square feet and employing approximately 1,000 associates, the ES3 facility becomes the largest DC in the Ahold Delhaize network. It will continue to service stores under the Giant Food and The Giant Company banners. C&S will stay involved as a third-party labor vendor. The Dutch retailer also announced that it will push back the transition of C&S’s fresh distribution center in Chester, NY from later this year until 2023, the year the big chain expects the huge distribution integration project to be completed. Currently, there are 22 DCs under the control of the retailer’s ADUSA Supply Chain Services unit.
Late last month Northeast Grocery Inc. (NGI), the parent firm of both Tops and Price Chopper, announced that C&S would assume responsibilities for Price Chopper’s warehouse product procurement of grocery, frozen, general merchandise and all fresh needs. C&S has long been Tops’ primary supplier and after the merger between the two companies last year, it became obvious that distribution consolidation would be a top priority (Price Chopper previously self-distributed). The announcement comes as part of a new procurement agreement between NGI and the Keene, NH-based wholesaler. Here’s more from the internal memo co-signed by Blaine Bringhurst, president of Price Chopper, and Glen Bradley, senior VP-sales, merchandising and marketing for the Schenectady, NY-based retailer: “All assortment, category management, warehousing and transportation will continue to be handled by the Price Chopper/Market 32 and Northeast Grocery teams. We expect that our customers will benefit greatly from the size, scale, in-stock position and other capabilities that C&S’s robust partnership brings. The current Price Chopper/Market 32 merchandising team will continue to have the primary relationship and work directly with all our trade partners on assortment decisions, promotional planning and all other aspects of category management. The team will continue to negotiate all traditional trade funding directly with our trade partners. It is also our expectation that historical trade rates will remain in effect, so that we can continue to drive our shared business goals forward. We see an added benefit from our C&S relationship, with our category management team’s ability to have an even greater focus on the customer, building relationships with our trade partners and selling more product.”
We have a few deaths to report this month. From the world of show biz, Mickey Gilley is dead at 86. Gilley, a country music honky-tonk piano player from Louisiana who began his career in the 1950s, is best known for serving as the inspiration for the 1980 film “Urban Cowboy” which was partly filmed at the eponymously named Pasadena. TX club he co-owned. Before it was a very popular movie with John Travolta and Debra Winger, “The Ballad of the Urban Cowboy: America’s Search for True Grit” was an excellent short story that appeared in Esquire and was written in 1978 by talented author and screenwriter Aaron Latham (who incidentally is married to Lesley Stahl) and helped popularize Texas cowboy culture. All told, Gilley recorded 17 singles that rose to number one on the country charts. He was also the cousin of the great Jerry Lee Lewis and the not-so-great Jimmy Swaggart. Gilley passed away shortly after completing a 10-show road tour.
Two excellent athletes from yesteryear have also left us. Daryle Lamonica, 80, the former All-Pro quarterback for the Oakland Raiders will now be launching 60-yard “go” patterns at a higher altitude. Lamonica was a highly recruited high school talent from Clovis, CA (near Fresno) who attended Notre Dame and was later drafted by both the Green Bay Packers and Buffalo Bills. He opted to join the AFL thinking he could become a starting player more quickly than in the established NFL (the Packers QB at the time was Hall of Famer Bart Starr). Mostly a backup for the Bills, Lamonica was traded to the Raiders in 1967 and quickly became the starting quarterback on a team that went 13-1 and made it to Super Bowl II (losing to the Packers). As for his “Mad Bomber” nickname: it was the legendary (in his own mind) sportscaster Howard Cosell who created that moniker because of Lamonica’s penchant for throwing deep passes. At 6’3” and 218 pounds (big for a QB in those days) and with a powerful throwing arm, Lamonica would throw at least half a dozen long bombs targeted to great receivers like Fred Biletnikoff and Warren Wells. Those old AFL games between the Raiders and the Kansas Chiefs or Houston Oilers were some of the best football watching ever and Lamonica was a big part of that enjoyment.
Also passing away was Guy LaFleur, one of the greatest hockey players that I’ve ever seen in a live game. Born in Thurso, Quebec, about 100 miles away from Montreal, LaFleur was selected as the number one overall pick in the 1971 amateur draft by his favorite team, the Montreal Canadiens, who had won the Stanley Cup the prior year. His electric skating style was evident from the start – great speed and quickness with a flair for creating instant offense for what was already the best team in the NHL. During his first three seasons, LaFleur’s contributions as a scorer were modest, as he tallied a combined 78 goals. However, in 1974-1975, things began to change. He scored 53 goals that season. LaFleur became the first player in league history to score at least 50 goals and 100 assists a year for six consecutive years. During a career that lasted 17 seasons, “The Flower” amassed 560 goals and 793 assists. In the playoffs, he added another 58 goals and 76 assists. LaFleur won the Art Ross Trophy (leading scorer) three times; and the Hart Memorial Trophy (NHL MVP) twice. He was inducted in the Hockey Hall of Fame in 1988. During his career, “Les Habitants” won the Stanley Cup five times. A beautiful player to watch, Guy La Fleur will be missed by many, many hockey fans.
I close with my thoughts on the senseless killing of 10 innocent victims earlier this month at a Tops Friendly Market in Buffalo once again underscored the need for stricter gun control laws and lots more money being devoted to mental health. When will the violence and destruction end? It’s hard to believe that 10 shoppers were just going about their business on a Saturday afternoon when their lives were taken by a crazy, radicalized 18-year old white supremacist (three store associates were also wounded). But then again, it really isn’t so hard to believe. A Kroger supermarket in Boulder? A Walmart in El Paso? Synagogues, churches, schools, movie theatres? Columbine, Parkland, Indianapolis, San Jose, Atlanta, Las Vegas? At some point, something’s gotta change. But I fear it won’t. It’s been nearly 10 years since another underage domestic terrorist slaughtered 26 children and adults at the Sandy Hook Elementary School and little has been done to fix the problem. You can blame the gun lobby, indifferent and cowardly politicians or the increasing polarization of what is now clearly two Americas. It really doesn’t matter. You wanna make a difference? Get involved and let your voice be heard. Because I’m mad as hell and I’m gonna try to not take it anymore. May all the victims rest in peace.