What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-06-08 compared with 2022-03-10 · 94 added, 46 removed, 159 unchanged (47% of the section changed)

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Village Super Market, Inc.

(the “Company” or “Village”) operates a chain of twenty-nine ShopRite supermarkets, five Fairway Markets and three Gourmet Garage specialty markets located in New Jersey, New York, Pennsylvania and Maryland.

(the “Company” or “Village”) operates a chain of twenty-nine ShopRite supermarkets, five Fairway Markets and four Gourmet Garage specialty markets located in New Jersey, New York, Pennsylvania and Maryland.

Village is the second largest member of Wakefern Food Corporation (“Wakefern”), the nation’s largest retailer-owned food cooperative and owner of the ShopRite, Fairway Market and Gourmet Garage names.

As further described in the Company’s Form 10-K, this ownership interest in Wakefern provides Village with many of the economies of scale in purchasing, distribution, advanced retail technology, marketing and advertising associated with chains of greater size and geographic coverage.

On April 29, 2022, Village opened a 14,600 sq.

Gourmet Garage in the West Village in Manhattan, NYC.

On February 22, 2021, Village closed the ShopRite store located in Silver Spring, Maryland.

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Certain of our stores include the Village Food Garden concept featuring a restaurant style kitchen, and several kiosks offering a wide variety of store prepared specialty foods for both take-home and in-store dining.

Online grocery ordering for in-store pick up or home delivery through ShopRite from Home is available in all of our ShopRite stores.

Customers can browse our circular, create and edit shopping lists and use ShopRite from Home through shoprite.com or the ShopRite app.

Online grocery ordering for in-store pick-up or home delivery is available in all of our ShopRite stores.

Customers can browse our circular, create and edit shopping lists and place orders for pick-up or delivery through shoprite.com or the ShopRite app.

Additionally, the ShopRite and Fairway Order Express apps enable customers to pre-order deli, catering, specialty occasion cakes and other items.

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and hourly labor rates.

NON-GAAP MEASURES

The accompanying Consolidated Financial Statements, including the related notes, are presented in accordance with generally accepted accounting principles ("GAAP").

We provide non-GAAP measures, including Adjusted net income and Adjusted operating and administrative expenses as management believes these supplemental measures are useful to investors and analysts.

These non-GAAP financial measures should not be reviewed in isolation or considered as a substitute for our financial results as reported in accordance with GAAP, nor as an alternative to net income, operating and administrative expense or any other GAAP measure of performance.

Adjusted net income and Adjusted operating and administrative expense are useful to investors because they provide supplemental measures that exclude the financial impact of certain items that affect period-to-period comparability.

Management and the Board of Directors use these measures as they provide greater transparency in assessing ongoing operating performance on a period-to-period basis.

Other companies may have different definitions of Non-GAAP Measures and provide for different adjustments, and comparability to the Company's results of operations may be impacted by such differences.

The Company's presentation of Non-GAAP Measures should not be construed as an implication that its future results will be unaffected by unusual or non-recurring items.

The following tables reconciles Net (loss) income to Adjusted net income and Operating and administrative expenses to Adjusted operating and administrative expenses:

13 Weeks Ended 39 Weeks Ended

2022 April 24,

2021 April 30,

2022 April 24,

Net (loss) income $ (3,231) $ 2,574 $ 14,227 $ 10,490

Adjustments to Operating and administrative expense:

Gain on sale of assets (1) — (724) — (724)

Pension termination and settlement charges (2) 12,296 — 12,296 —

Store closure costs (3) — 325 — 325

Adjustments to Income taxes:

Tax impact of adjustments (3,780) 122 (3,780) 122

Adjusted net income $ 5,285 $ 2,297 $ 22,743 $ 10,213

Operating and administrative expense $ 137,751 $ 121,156 $ 385,521 $ 371,968

Total adjustments to operating administrative expense (12,296) 399 (12,296) 399

Adjusted operating and administrative expense $ 125,455 $ 121,555 $ 373,225 $ 372,367

Adjusted operating and administrative expense as a % of sales 24.99 % 25.27 % 24.34 % 24.92 %

(1) The 13 and 39 weeks ended April 24, 2021 includes a $724 gain on the sale of the pharmacy prescription list related to the closure of the Silver Spring, Maryland store.

(2) The 13 and 39 weeks ended April 30, 2022 includes pension termination charges of $12,296 related to the Village Super Market Inc.

Employees' Retirement Plan.

(3) The 13 and 39 weeks ended April 24, 2021 includes $325 of costs related to the closure of the Silver Spring, Maryland store.

RESULTS OF OPERATIONS

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13 Weeks Ended 39 Weeks Ended

January 29, 2022 January 23, 2021 January 29, 2022 January 23, 2021

April 30, 2022 April 24, 2021 April 30, 2022 April 24, 2021

Sales 100.00 % 100.00 % 100.00 % 100.00 %

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Depreciation and amortization 1.61 1.74 1.62 1.74

Operating income 2.74 1.26 2.45 1.13

Operating (loss) income (0.84) 0.81 1.37 1.02

Interest expense (0.20) (0.21) (0.19) (0.20)

Interest income 0.19 0.19 0.18 0.18

Income before taxes 2.73 1.24 2.44 1.11

(Loss) income before income taxes (0.85) 0.79 1.36 1.00

Income taxes (0.22) 0.25 0.43 0.30

Net income 1.90 % 0.87 % 1.69 % 0.78 %

Sales were $537,408 in the 13 weeks ended January 29, 2022, an increase of 2.8% compared to the 13 weeks ended January 23, 2021.

Net (loss) income (0.63) % 0.54 % 0.93 % 0.70 %

Sales were $501,962 in the 13 weeks ended April 30, 2022, an increase of 4.3% compared to the 13 weeks ended April 24, 2021.

Sales increased due to an increase in same store sales of 4.6% partially offset by the closure of the Silver Spring, Maryland store in February 2021.

Same store sales increased due primarily to increased sales in New York City stores, retail price inflation and continued growth in Supplemental Nutrition Assistance Program ("SNAP") benefit redemptions.

Increases in transaction counts were partially offset by decreased basket sizes and same store digital sales were flat as we cycled against the initial months following the COVID-19 outbreak in our trade area.

Sales were $1,031,619 in the 26 weeks ended January 29, 2022, an increase of 1.8% compared to the 26 weeks ended January 23, 2021.

Same store sales increased due primarily to increased sales in New York City stores, inflation and continued growth in Supplemental Nutrition Assistance Program ("SNAP") benefit redemptions.

Increases in transaction counts were partially offset by decreased basket sizes and same store digital sales were flat.

Sales were $1,533,581 in the 39 weeks ended April 30, 2022, an increase of 2.6% compared to the 39 weeks ended April 24, 2021.

Sales increased due to an increase in same store sales of 3.7% partially offset by the closure of the Silver Spring, Maryland store in February 2021.

Same store sales increased due primarily to increased sales in New York City stores, retail price inflation and continued growth in SNAP benefit redemptions.

On a two-year stacked basis, same store sales increased 10.9% and 10.0% in the 13 and 26 weeks ended January 29, 2022, respectively.

Same store digital sales increased 154% on a two-year stacked basis for both the 13 and 26 weeks ended January 29, 2022.

Same store sales increased due primarily to increased sales in New York City stores, inflation and continued growth in SNAP benefit redemptions.

Increases in transaction counts were partially offset by decreased basket sizes and same store digital sales were flat.

On a two-year stacked basis, same store sales decreased 1.6% and increased 6.0% in the 13 and 39 weeks ended April 30, 2022, respectively.

Same store digital sales increased 106% and 135% on a two-year stacked basis for the 13 and 39 weeks ended April 30, 2022, respectively.

New stores and replacement stores are included in same store sales in the quarter after the store has been in operation for four full quarters.

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Gross Profit .

Gross profit as a percentage of sales increased .71% in the 13 weeks ended January 29, 2022 compared to the 13 weeks ended January 23, 2021 due primarily to increased departmental gross margin percentages (.63%), a favorable change in product mix (.12%) and decreased warehouse assessment charges from Wakefern (.20%), partially offset by decreased patronage dividends and rebates received from Wakefern (.24%).

Gross profit as a percentage of sales increased .48% in the 13 weeks ended April 30, 2022 compared to the 13 weeks ended April 24, 2021 due primarily to increased departmental gross margin percentages (.70%), decreased warehouse assessment charges from Wakefern (.21%), and a favorable change in product mix (.05%), partially offset by higher LIFO charges (.18%), decreased patronage dividends and rebates received from Wakefern (.16%) and higher promotional spending (.14%).

Department gross margins increased due primarily to pricing initiatives and improvements in commissary operations.

Gross profit as a percentage of sales increased .47% in the 26 weeks ended January 29, 2022 compared to the 26 weeks ended January 23, 2021 due primarily to increased departmental gross margin percentages (.66%) and a favorable change in product mix (.10%), partially offset by increased warehouse assessment charges from Wakefern (.17%) and decreased patronage dividends and rebates received from Wakefern (.12%).

Gross profit as a percentage of sales increased .47% in the 39 weeks ended April 30, 2022 compared to the 39 weeks ended April 24, 2021 due primarily to increased departmental gross margin percentages (.71%) and a favorable change in product mix (.09%), partially offset by higher LIFO charges (.09%), increased warehouse assessment charges from Wakefern (.05%), decreased patronage dividends and rebates received from Wakefern (.13%) and higher promotional spending (.05%).

Department gross margins increased due primarily to pricing initiatives and improvements in commissary operations.

Operating and Administrative Expense.

Operating and administrative expense as a percentage of sales decreased .65% in the 13 weeks ended January 29, 2022 compared to the 13 weeks ended January 23, 2021 due primarily to lower labor costs and fringe benefits (.70%) and less advertising spending (.12%), partially offset by higher maintenance and repair costs (0.10%)

and increased external fees and transportation costs associated with digital sales (.07%).

Operating and administrative expense as a percentage of sales increased 2.26% in the 13 weeks ended April 30, 2022 compared to the 13 weeks ended April 24, 2021.

The 13 weeks ended April 30, 2022 includes a $12.3 million (2.45% as a percentage of sales) settlement charge as a result of the termination of the Village Super Market, Inc.

Employees’ Retirement Plan.

The Company contributed cash of $1.5 million to fully fund the plan and the

remaining $10.8 million represents non-cash charges for unrecognized losses within accumulated other comprehensive loss as of the termination date.

Adjusted operating and administrative expense as a percentage of sales decreased .28% due primarily to lower labor costs and fringe benefits (.29%) and less advertising spending (.09%), partially offset by increased external fees and transportation costs associated with digital sales (.12%).

Labor costs decreased due to productivity initiatives, labor shortages and sales leverage partially offset by minimum wage and demand driven pay rate increases.

Operating and administrative expense as a percentage of sales decreased .74% in the 26 weeks ended January 29, 2022 compared to the 26 weeks ended January 23, 2021 due primarily to lower labor costs and fringe benefits (.77%) and less advertising spending (.12%), partially offset by increased external fees and transportation costs associated with digital sales (.11%).

Operating and administrative expense as a percentage of sales increased .24% in the 39 weeks ended April 30, 2022 compared to the 39 weeks ended April 24, 2021.

Adjusted operating and administrative expense as a percentage of sales decreased .58% due primarily to lower labor costs and fringe benefits (.61%) and less advertising spending (.11%), partially offset by increased external fees and transportation costs associated with digital sales (.11%).

Labor costs decreased due to productivity initiatives, labor shortages and sales leverage partially offset by minimum wage and demand driven pay rate increases.

Depreciation and Amortization .

Depreciation and amortization expense decreased in both the 13 and 26 weeks ended January 29, 2022 compared to the 13 and 26 weeks ended January 23, 2021 due primarily to closure of the Silver Spring, Maryland ShopRite in February 2021.

Depreciation and amortization expense decreased in both the 13 and 39 weeks ended April 30, 2022 compared to the 13 and 39 weeks ended April 24, 2021 due primarily to the closure of the Silver Spring, Maryland ShopRite in February 2021 and the timing of capital expenditures.

Interest Expense .

Interest expense decreased in both the 13 and 26 weeks ended January 29, 2022 compared to the 13 and 26 weeks ended January 23, 2021 due to lower average outstanding borrowings.

Interest expense decreased in both the 13 and 39 weeks ended April 30, 2022 compared to the 13 and 39 weeks ended April 24, 2021 due to lower average outstanding borrowings.

Interest Income .

Interest income increased in both the 13 and 26 weeks ended January 29, 2022 compared to the 13 and 26 weeks ended January 23, 2021 due primarily to larger amounts invested in variable rate notes receivable from Wakefern and demand deposits invested at Wakefern.

Interest income increased in both the 13 and 39 weeks ended April 30, 2022 compared to the 13 and 39 weeks ended April 24, 2021 due primarily to higher interest rates and larger amounts invested in variable rate notes receivable from Wakefern and demand deposits invested at Wakefern.

Income Taxes.

The effective income tax rate was 30.7% in the both the 13 and 26 weeks ended January 29, 2022 compared to 29.9% in the 13 and 26 weeks ended January 23, 2021.

The increase in the effective income tax rate is due primarily to greater apportionment in higher state tax rate jurisdictions.

Net income was $10,129 in the 13 weeks ended January 29, 2022 compared to $4,555 in the 13 weeks ended January 23, 2021 due primarily to the 4.4% increase in same store sales, higher gross profit margins and lower payroll costs.

Net income was $17,457 in the 26 weeks ended January 29, 2022 compared to $7,916 in the 26 weeks ended January 23, 2021 due primarily to the 3.4% increase in same store sales, higher gross profit margins and lower payroll costs.

The effective income tax rate was 25.4% in the 13 weeks ended April 30, 2022 compared to 31.5% in the 13 weeks ended April 24, 2021.

The 13 weeks ended April 30, 2022 includes the recognition of a discrete tax benefit related to the pension termination settlement charge recognized in the quarter.

Excluding the impact of the pension termination settlement charge and related discrete tax benefit, the effective income tax rate was 33.7% in the 13 weeks ended April 30, 2022.

The increase in the effective income tax rate is due primarily to greater apportionment in higher state tax rate jurisdictions and unfavorable return to provision adjustments in the 13 weeks ended April 30, 2022 as a result of receiving less work opportunity tax credits than estimated.

The effective income tax rate was 31.7% in the 39 weeks ended April 30, 2022 compared to 30.3% in the 39 weeks ended April 24, 2021.

The increase in the effective income tax rate is due primarily to greater apportionment in higher state tax rate jurisdictions and unfavorable return to provision adjustments as a result of receiving less work opportunity tax credits than estimated.

Net (Loss) Income .

Net loss was $3,231 in the 13 weeks ended April 30, 2022 compared to net income of $2,574 in the 13 weeks ended April 24, 2021.

Adjusted net income was $5,285 in the 13 weeks ended April 30, 2022 compared to $2,297 in the 13 weeks ended April 24, 2021.

Adjusted net income increased 130% due primarily to the 4.6% increase in same store sales, higher gross profit margins and lower payroll costs.

Net income was $14,227 in the 39 weeks ended April 30, 2022 compared to $10,490 in the 39 weeks ended April 24, 2021.

Adjusted net income was $22,743 in the 39 weeks ended April 30, 2022 compared to $10,213 in the 39 weeks ended April 24, 2021.

Adjusted net income increased 123% due primarily to the 3.7% increase in same store sales, higher gross profit margins and lower payroll costs.

CRITICAL ACCOUNTING POLICIES

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The Company’s critical accounting policies relating to the impairment of long-lived assets, goodwill and indefinite-lived intangible assets, accounting for patronage dividends earned as a stockholder of Wakefern and accounting for pension plans, are described in the Company’s Annual Report on Form 10-K for the year ended July 31, 2021.

A s of January 29, 2022, there have been no changes to the critical accounting policies contained therein.

A s of April 30, 2022, there have been no changes to the critical accounting policies contained therein.

The preparation of financial statements in conformity with U.S.

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LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $40,274 in the 26 weeks ended January 29, 2022 compared to $24,911 in the corresponding period of the prior year.

The change in cash flows from operating activities in fiscal 2022 was primarily due to changes in working capital and higher net income.

Net cash provided by operating activities was $51,702 in the 39 weeks ended April 30, 2022 compared to $32,995 in the corresponding period of the prior year.

The change in cash flows from operating activities in fiscal 2022 was primarily due to changes in working capital and higher net income adjusted for non-cash items.

Working capital changes, including Other assets and liabilities, increased cash flows from operating activities by $1,279 in fiscal 2022 compared to a decrease of $3,820 in fiscal 2021.

The change in impact of working capital is due primarily to an increase in accounts payable to Wakefern and a lesser increase in merchandise inventories partially offset by an increase in income taxes receivable.

During the 26 weeks ended January 29, 2022, Village used cash to fund capital expenditures of $30,483, dividends of $6,525, principal payments of long-term debt of $3,975 and additional investments of $1,190 in notes receivable from Wakefern.

Capital expenditures primarily include costs associated with the purchase of the Galloway store shopping center, the purchase of land in central New Jersey for a potential replacement store and other development, continued expansion of ShopRite from Home and self-checkout, and various merchandising, technology, equipment and facility upgrades.

The change in impact of working capital is due primarily to an increase in accounts payable to Wakefern and partially offset by a decrease in income taxes payable and an increase in merchandise inventories due primarily to cost inflation.

During the 39 weeks ended April 30, 2022, Village used cash to fund capital expenditures of $36,834, dividends of $9,787, principal payments of long-term debt of $6,174, an investment in a real estate partnership for the development of a retail center in Old Bridge, New Jersey of $4,393 and additional investments of $1,788 in notes receivable from Wakefern.

Capital expenditures primarily include costs associated with the purchase of the Galloway store shopping center, the purchase of land in central New Jersey for a potential replacement store and other development, continued expansion of self-checkout, and various merchandising, technology, equipment and facility upgrades.

We expect capital expenditures to approximate $55,000 in fiscal 2022.

Planned expenditures include two major remodels, several smaller store remodels, the purchase of the Galloway store shopping center, the purchase of the Vineland store shopping center, the purchase of land in central New Jersey for a potential replacement store and other development, one new Gourmet Garage store, continued expansion of ShopRite from Home and self-checkout, and various merchandising, technology, equipment and facility upgrades.

At January 29, 2022, the Company held variable rate notes receivable due from Wakefern of $27,949 that earn interest at the prime rate plus 1.25% and mature on August 15, 2022 and $28,536 that earn interest at the prime rate plus .75% and mature on February 15, 2024.

Planned expenditures include store remodels, the purchase of the Galloway store shopping center, the purchase of the Vineland store shopping center, the purchase of land in central New Jersey for a potential replacement store and other development, the construction of a new Gourmet Garage in the West Village in Manhattan, continued expansion of self-checkout, and various merchandising, technology, equipment and facility upgrades.

On April 28, 2022 the Company entered into a partnership agreement for 30% interest in the development of a retail center in Old Bridge, New Jersey, which includes a Village replacement store with future lease obligations of $9,280.

Village will fund its share of project costs estimated to be $15,000 to $20,000 over the two to three year life of the project.

As of April 30, 2022, Village has invested $4,393 into the real estate partnership, which is accounted for as an equity method investment included in Other assets on the Consolidated Balance Sheet.

At April 30, 2022, the Company held variable rate notes receivable due from Wakefern of $28,262 that earn interest at the prime rate plus 1.25% and mature on August 15, 2022 and $28,821 that earn interest at the prime rate plus .75% and mature on February 15, 2024.

Wakefern has the right to prepay these notes at any time.

Under certain conditions, the Company can require Wakefern to prepay the notes, although interest earned since inception would be reduced as if it was earned based on overnight money market rates as paid by Wakefern on demand deposits.

Working capital was $75,170 at January 29, 2022 compared to $44,023 at July 31, 2021.

Working capital was $72,340 at April 30, 2022 compared to $44,023 at July 31, 2021.

Working capital ratios at the same dates were 1.47 and 1.29 to one, respectively.

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The principal purpose of the Credit Facility is to finance general corporate and working capital requirements, Village’s acquisition of certain Fairway assets and the purchase of the Galloway store shopping center.

The Credit Facility also provides for up to $25,000 of letters of credit ($7,336 outstanding at January 29, 2022), which secure obligations for store leases and construction performance guarantees to municipalities.

The Credit Facility also provides for up to $25,000 of letters of credit ($7,336 outstanding at April 30, 2022), which secure obligations for store leases and construction performance guarantees to municipalities.

The Credit Facility contains covenants that, among other conditions, require a minimum tangible net worth, a minimum fixed charge coverage ratio and a maximum adjusted debt to EBITDAR ratio.

The Company was in compliance with all covenants of the credit agreement at January 29, 2022.

Based on current trends, the Company believes cash and cash equivalents on hand at January 29, 2022, operating cash flow and availability under our Credit Facility are sufficient to meet our liquidity needs for the next twelve months and for the foreseeable future beyond the next twelve months.

There have been no other substantial changes as of January 29, 2022 to the contractual obligations and commitments discussed in the Company’s Annual Report on Form 10-K for the year ended July 31, 2021.

The Company was in compliance with all covenants of the credit agreement at April 30, 2022.

Based on current trends, the Company believes cash and cash equivalents on hand at April 30, 2022, operating cash flow and availability under our Credit Facility are sufficient to meet our liquidity needs for the next twelve months and for the foreseeable future beyond the next twelve months.

There have been no other substantial changes as of April 30, 2022 to the contractual obligations and commitments discussed in the Company’s Annual Report on Form 10-K for the year ended July 31, 2021.

This Form 10-Q contains certain forward-looking statements about Village’s future performance.

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The Company undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof.

• Due to continued uncertainties in the extent and duration of the COVID-19 pandemic and its impact on our business, we will not provide same store sales guidance for fiscal 2022.

• We expect same store sales to increase from 3.25% 4.25% in fiscal 2022.

• We expect capital expenditures to approximate $55,000 in fiscal 2022.

• The Board’s current intention is to continue to pay quarterly dividends in 2022 at the most recent rate of $.25 per Class A and $.1625 per Class B share.

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• We expect our effective income tax rate in fiscal 2022 to be in the range of 30.5% - 31.5%.

• We expect approximately $15,891 of net periodic pension costs in fiscal 2022 related to the three Company sponsored defined benefit pension plans, including a $15,155 non-cash, pre-tax settlement charge representing the remaining unrecognized losses within accumulated other comprehensive loss related to a plan termination expected to occur during fiscal 2022.

The Company will fully fund this plan and liquidate all plan assets to purchase annuity contracts from an insurance company for all participants who do not elect a lump sum distribution.

As of July 31, 2021, the funded status of this plan was a net liability of $ 3,844 .

• We expect approximately $12,900 of net periodic pension costs in fiscal 2022 related to the three Company sponsored defined benefit pension plans, including a $12,296 pre-tax settlement charge as a result of the termination of the Village Super Market, Inc.

Employees’ Retirement Plan.

The Company contributed cash of $1,485 to fully fund the plan and the remaining $10,811 represents non-cash charges for unrecognized losses within accumulated other comprehensive loss as of the termination date.

Contributions to the remaining plans are expected to be immaterial in fiscal 2022.

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Due to the nature of our business, personal information about our customers, vendors and associates is received and stored in these information systems.

In addition, confidential information is transmitted through our ShopRite from Home online business at shoprite.com and through the ShopRite app.

In addition, confidential information is transmitted through our online business at shoprite.com and through the ShopRite app.

Unauthorized parties may attempt to access information stored in or to sabotage or disrupt these systems.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis