Struggling NYC Stores Drive Higher Sales and Margins for Village in Q1

Village Super Market Inc. said sales in its fiscal first quarter increased by 20.3% on the addition of Fairway Market stores in New York and a same-store sales gain of 6.6%, although the newly acquired units continued to struggle vs. their historic performance amid impacts of the coronavirus pandemic in Manhattan.

For the quarter ending Oct. 24, Village said revenues totaled $490.1 million. Net income in the period increased 30.3% to $3.36 million, but were flat excluding pre-opening and closing expenses associated with a Stroudsburg, Pa., replacement store in last year’s first quarter.

Sales increased due to the $76 million Fairway acquisition, which was completed in May, the opening of the Stroudsburg replacement store, and increased customer demand across most stores due to the impact of the COVID-19 pandemic, which sparked the comp gain. Like many peers, Village said it has continued to experience higher average basket sizes and decreased transaction counts as customers consolidate shopping trips.

Digital sales growth accelerated through both ShopRite From Home and partnerships with online grocery picking and delivery services, increasing by 172%.

The company said demand remained high in most stores, but noted that sales at Fairway and Gourmet Garage locations in Manhattan have been “significantly” impacted due to residential population migration out of the city and less commuter and tourist traffic during the COVID-19 pandemic. Village acquired three Gourmet Garage specialty stores a year ago and five Fairway stores, all of them in Manhattan. These units helped to raise companywide margins during the quarter to 28.15% of sales vs. 27.87% a year ago.

Margins at Village’s ShopRite stores declined by 0.39% in the quarter due to decreased departmental gross margin percentages (0.70%), decreased patronage dividends and rebates received from cooperative supplier Wakefern Food Corp. (0.10%,  and an unfavorable change in product mix (0.10%), partially offset by lower promotional spending (0.35%) and increased leverage on warehouse assessment charges from Wakefern (0.16%).

Departmental gross margins at ShopRite were down on the introduction a year ago of ShopRite’s Low Price Promise pricing strategy, which introduced everyday low pricing on thousands of items.

Excluding on-time expenses associated with the Stroudsburg store, operating and administrative expense as a percentage of sales increased by 0.33% in the quarter due primarily to incremental costs related to COVID-19, including enhanced wages and benefits and expanded safety and sanitation protocols (0.24%), increased occupancy costs due primarily to the acquisitions of Fairway (0.79%), increased costs associated with digital sales (0.40%), partially offset by decreased payroll (0.75%) and workers’ compensation and other fringe benefits (0.25%).

Payroll decreased primarily due to leverage from higher sales and reductions in service department offerings, partially offset by the addition of Fairway and growth of ShopRite From Home.

Village Super Market, based in Springfield, N.J., operates a chain of 35 supermarkets in New Jersey, New York, Maryland and Pennsylvania under the ShopRite and Fairway banners and three Gourmet Garage specialty markets in New York City.