Taking Stock

Print Friendly

Six Key Retailers Post Solid Comps, Most Show Share Price Gains, Too

Six of the country’s largest food retailers have posted increased comp sales and solid earnings in their most recent financial periods. Walmart, Ahold Delhaize, Kroger, Target, Costco and Publix have all enjoyed sales increases and many have seen their stock prices grow in recent months. And on a regional level, Weis Markets also achieved strong comp sales and increased earnings.

At Walmart, total revenue for its fourth quarter ended January 26, 2018 increased 4.1 percent to $136.3 billion. At its U.S. stores, comp sales increased 2.6 percent (excluding fuel) and comp traffic rose 1.6 percent.  Its e-commerce business continued to grow rapidly, with the Bentonville, AR-based retailer reporting a 23 percent increase for its fourth quarter, which was less than Walmart’s spectacular 50 percent ecommerce revenue gain in its third period.

Consolidated operating income at Walmart was $4.5 billion, a decrease of 28 percent. However, the company said the earnings decline would have decreased less than 1 percent if certain “discrete” charges weren’t included. Some of those “discrete” items include restructuring charges, asset impairments and the awarding of lump sum bonuses.

“We have good momentum in the business with solid sales growth across Walmart U.S., Sam’s Club and international,” said Doug McMillon, president and CEO of Walmart. “We’re making real progress putting our unique assets to work this past year. We’re making decisions to position the business for success and investing to win with customers and shareholders.”

For fiscal 2018, total revenue at the company was $500.3 billion, an increase of $14.5 billion, or 3 percent. Excluding currency rate fluctuations, total revenue was $500.9 billion, an increase of $15.1 billion, or 3.1 percent.

For fiscal 2019, Walmart expects comp sales for the 52-week period, excluding fuel, to rise at a 2 percent rate, with e-commerce growth expected to grow approximately 40 percent.  Capital expenditures are expected to be approximately $11 billion.

At presstime, Walmart’s shares were trading at $88.30, up from $79.68 six months ago.

After announcing “sales only” data last month, Ahold Delhaize posted a strong earnings performance during its fourth quarter ended December 31, 2017, completing its first year as a merged company.

“We delivered synergies ahead of schedule and continued to show underlying operating margin expansion, with stable or increasing market share in our major markets,” said CEO Dick Boer. “In a dynamic environment, our great local brands delivered strong results, tapping into changing consumer behavior.”

In the U.S., Ahold USA’s fourth quarter net sales increased 1.1 percent to $6.8 billion. Comparable store sales, excluding fuel, grew 0.6 percent.

During the quarter, Giant/Martin’s opened eight new in-store “Beer & Wine Eatery” locations, operating 54 of these establishments by year-end. Online grocer Peapod said it improved its customer satisfaction score by improving in the areas of on-time delivery, available delivery slots, in-stock items, value perception and the user-friendliness of its online portal.

Going forward, early this year, the Stop & Shop division will begin a pilot of its Scan it and Go payment solution, which will allow customers to make automatic bank withdrawals at checkout.

At its Delhaize America unit, comparable store revenue (excluding fuel) grew 1.5 percent, with both the Food Lion and Hannaford banners posting positive comp growth. Food Lion continued to benefit from its Easy, Fresh and Affordable store remodel program in the Charlotte, NC market last year and the Richmond and Greensboro, NC markets in 2018, the company said.

Food Lion completed the pilot of its Shop & Earn digital loyalty program which will roll out to all markets in the first quarter of this year. Hannaford’s My Rewards loyalty program became available chain-wide in January of this year. The banner also expanded its click-and-collect service.

In 2018, the Ahold USA and Delhaize America segments will be combined in financial reports, reflecting governance structure.

Said Boer: “We are investing to make shopping more convenient, introducing new technologies to improve the customer experience and further ease the checkout process, as we live up to our promise to be a better place to shop. We are also stepping up our focus on fresh inspiration as customers are increasing looking for healthier options, organic products and locally growth produce, which will help us to reach our target of 50 percent healthy products in own-brands sales by 2020.”

Ahold Delhaize, which trades on Euronext, reported a share price of 14.79 euro ($18.32) at presstime on March 14, versus 12.39 euro ($15.35) six months ago on September 14, 2017.

Kroger reported identical supermarket sales (without fuel) of 1.5 percent in its fourth quarter ended February 3, 2018. Total sales for the quarter increased 12.4 percent to $31 billion compared to $27.6 billion for the same period last year.

Rodney McMullen, chairman and CEO of the Cincinnati, OH based retailer, said: “We launched Restock Kroger in the fall of 2017 and finished this year with positive momentum in our sales and overall business. Customers are letting us know that they see, feel and appreciate our efforts to redefine the customer experience – and they are rewarding us with growing loyalty. This is the cycle that creates long-term value for shareholders.”

He continued: “The Tax Cuts and Jobs Act is a catalyst that is enabling us to accelerate investments in Restock Kroger. We are taking a balanced approach to ensure tax reform benefits our associates, customers and shareholders. What we’ve previously said is that sharing the benefits with our associates and customers will create a more sustainable and stronger business model for the future. This balanced approach is also consistent with our values and Kroger’s purpose, to feed the human spirit.”

Net earnings for the fourth quarter totaled $854 million, or $0.96 per diluted share. Adjusted net earnings totaled $562 million, up from $506 million in the same period last year.

For the full fiscal year, Kroger’s net earnings totaled $1.9 billion, compared with $2.0 billion in 2016.  Total sales in 2017 (excluding fuel, the 53rd week and merger expenses) rose 2.2 percent compared to 2016.

In its fourth quarter release, Kroger detailed its financial strategy of using its free cash flow to drive growth while also maintaining its current investment grade debt rating and returning capital to shareholders. It also announced that it had signed a definitive agreement to sell its convenience store division to UK-based EG Group for $2.15 billion. The Cincinnati-based merchant said that over the past year it has used cash to: contribute an incremental $1.2 billion pre-tax to company-sponsored pension plans and $467 million pre-tax to satisfy withdrawal obligations to the Central States Pension Fund; repurchase 61 million common shares for $6.1 billion; pay $444 million in dividends; and invest $3 billion in capital.

Kroger’s shares at presstime on March 14 were trading at $24.01 up from $21.26 on September 17, 2017.

At Target, strong traffic growth in both stores and digital drove a fourth quarter comparable sales increase of 3.6 percent. Despite solid sales increases, Target’s earnings were down from $1.34 billion to $1.15 billion in its fourth quarter ended January 28, 2018. However, on an adjusted basis, the Minneapolis, MN based mass merchant said earnings per share were $2.02 as compared to $1.45 in 2017.

Traffic grew 3.2 percent in Target’s fourth quarter, reflecting healthy increases in both stores and digital channels. Fourth quarter comp digital channel sales increased 29 percent, on top of 34 percent last year, contributing 1.8 percentage points of comparable growth.

“Our fourth quarter results demonstrate the power of the significant investments we’ve made in our team and our business throughout 2017. Our team’s outstanding execution of Target’s strategic initiatives during the year delivered strong fourth quarter traffic growth in our stores and digital channels, which drove healthy comparable sales in every one of our five core merchandise categories,” said Target chairman and CEO Brian Cornell. “While we have a lot left to accomplish, our progress in 2017 gives us confidence that we are making the right long-term investments to best position Target for profitable growth in a rapidly changing consumer and retail investment.”

On March 14, Target’s shares were trading at $71.17 compared to $59.47 on September 14, 2017.

Issaquah, WA based Costco posted double-digit sales and income gains in its second quarter ended February 18, 2018.  Net sales for the period rose 10.8 percent, to $32.28 billion from the year ago period. Comparable-store sales, excluding the impact of fuel and currency changes, rose 5.4 percent.

Quarterly income rose 36 percent to $701 million from 2017. Earnings per share rose $0.17 due to a net income tax benefit of $74 million reflecting the new tax laws. Excluding the benefit, net income grew 22 percent. E-commerce sales jumped 28.5 percent to $1.5 billion, boosted by site traffic gains, higher conversion rates and more merchandise orders.

On March 14, 2018, shares in Costco were trading at $187.46 compared to $162.37 on September 14, 2017.

Lakeland, FL based Publix Super Markets also enjoyed comp store sales growth in its fourth quarter ended December 30, 2017, seeing an improvement of 3.2 percent over the same quarter last year. Sales for the fourth quarter were $8.9 billion, a 2.1 percent decline from last year’s $9.1 billion. However, excluding the extra week in the fourth quarter of 2016, sales for the fourth quarter of 2017 would have grown 5 percent, the company said.

Earnings for the fourth quarter of 2017, a 13-week period, were $766.6 million, versus $544.5 million in 2016’s fourth quarter, a 40.8 percent increase.

Net earnings for the fiscal year were $2.3 billion, compared with $2 billion in the 53-week fiscal 2016, a 13.1 percent increase. Sales in 2017 were $34.6 billion, a 1.6 percent increase from $34 billion in fiscal 2016; without the additional week in 2016, sales for 2017 would have risen 3.5 percent. Comps for the full-year were up 1.7 percent.

Publix is controlled by an employee stock ownership plan (ESOP) and its stock isn’t publicly traded – it is sold only to current associates and members of the board of directors, but its value is reported. In March 2018, its stock is valued at $41.40 per share versus $36.05 per share in September of 2017.

“I’m delighted that we had a significant increase in our stock price,” said Publix CEO and president Todd Jones. “I’m proud of our associate owners for their dedicated service to our customers and communities.”

Regionally, Weis Markets capped another excellent year with a strong fourth quarter performance.

Buoyed by what it termed ongoing price investments, disciplined sales promotions and an improved customer experience during fiscal 2017, Mid-Atlantic retailer Weis Markets posted a fourth-quarter comparable-store sales increase of 1.2 percent, while the quarter’s overall sales increased 2.2 percent, when adjusted for the additional week in 2016.

For the 13-week period ended Dec. 30, 2017, the Sunbury, PA-based retailer’s sales were $883.7 million, versus $925.1 million for the 14-week period ended Dec. 31, 2016. Weis Markets’ net income rose a substantial 54.7 percent to $63.7 million while earnings per share totaled $2.37, which the company attributed mainly to a $49.3 million decrease in deferred income tax courtesy of the recently passed Tax Cuts and Jobs Act.

“In 2017, we achieved record sales of $3.5 billion and generated our 15th consecutive quarter of increased comparable-store sales,” said Weis Markets chairman and CEO Jonathan Weis. “During this time, we also worked to efficiently integrate 44 newly acquired stores. We have done much to position our company for future profitable sales growth.”

Weis Markets’ year-to-date 2017 sales grew 12.8 percent, while comps edged up 1.5 percent when adjusted for the extra week in 2016.

For the 52-week period ending Dec. 30, 2017, the company’s sales rose 10.5 percent to $3.5 billion, versus $3.1 billion for the 53-week period in 2016. Year-to-date net income increased 12.9 percent to $98.4 million, while earnings per share rose 13 percent to $3.66, from $3.24 last year.