MILWAUKEE -- Roundy's here last week said retail acquisitions boosted its third-quarter sales, although the closing of two warehouses led to a decline in wholesale volume.
The company also said it is on schedule to open a new distribution center in Oconomowoc, Wis., during the first quarter.
"We will begin transitioning into that facility during the quarter, and our plan is to complete that process by the end of the quarter," Robert A. Mariano, chairman and chief executive officer, told industry analysts during a conference call last week to discuss financial results for the third quarter and 39 weeks ended Oct. 2.
Overall sales and service fees rose 2.5% to $1.2 billion for the 13-week quarter and 18.4% to $3.6 billion for the nine-month period, while net income declined 14.1% to $13.5 million for the quarter and rose 2.4% to $43.9 million for the year to date.
Sales in the retail segment jumped 10.1% to $748 million during the quarter and 33.7% to $2.2 billion during the 39-week period, with same store sales increasing 1.8% for the quarter and 2.4% for the year to date. The company said the sales increases were due to acquisitions -- 62 stores for the year to date, including 15 during the third quarter -- which contributed sales of $43.2 million in the quarter and approximately $505.5 million for the nine-month span.
The retail segment encompasses 126 stores, including 65 Pick 'n Save units and 30 Copps Food Stores in Wisconsin and 31 Rainbow Foods stores in the Minneapolis-St. Paul market. The 15 corporate stores added during the quarter were units of Pick 'n Save formerly operated by Roundy's customers, including seven that opened under Roundy's ownership in late September, a week before the third quarter ended.
Darren Karst, executive vice president and chief financial officer, said the acquisition from A&P of seven former Kohl's stores earlier in the year cannibalized sales from some of the company's existing stores, "though that impact will be more pronounced in the fourth quarter," he pointed out.
Mariano said the closing of 23 Kohl's stores by A&P in last year's third and fourth quarter enabled Roundy's to strengthen sales during that period, "but now that most of those stores [including the seven acquired by Roundy's] have reopened under other banners, we will continue to see cannibalization to our existing store base as we go forward."
Sales in Roundy's wholesale segment fell 2.5% to $823 million for the quarter and increased 9.1% to $2.5 billion for the year to date. The company said the decline in the quarter was primarily attributable to lost business associated with the closure in early September of distribution centers in Eldorado, Ill., and Evansville, Ind., most of whose volume transferred to a Roundy's facility in Lima, Ohio; for the nine months the wholesale segment enjoyed increased sales from the pickup of acquired stores that were not previously supplied by Roundy's, Karst said.
He said he doesn't expect the closings to have much impact on overall profitability "because those two facilities were operating at break-even levels. By closing them and transferring some of the volume to Lima, we were able to liquidate receivables and inventory and generate working capital, and we expect ultimately to sell those facilities."
Karst said Roundy's expects to invest $80 million to $90 million in capital expenditures this year and slightly more -- approximately $100 million -- next year.