What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-03-08 compared with 2022-12-07 · 46 added, 36 removed, 165 unchanged (33% of the section changed)

15 unchanged sentences

The Company also owns and operates an automated micro-fulfillment center to facilitate online order fulfillment for the south New Jersey stores.

The Company’s stores, seven of which are owned, average 54,000 total square feet.

The Company’s stores, eight of which are owned, average 54,000 total square feet.

These larger store sizes enable the Company to offer a wide variety of national branded and locally sourced food products, including grocery, meat, produce, dairy, deli, seafood, prepared foods, bakery and frozen foods as well as non-food product offerings, including health and beauty care, general merchandise, liquor and 21 in-store pharmacies.

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The following table sets forth the major components of the Consolidated Statements of Operations as a percentage of sales:

13 Weeks Ended

October 29, 2022 October 30, 2021

13 Weeks Ended 26 Weeks Ended

January 28, 2023 January 29, 2022 January 28, 2023 January 29, 2022

Sales 100.00 % 100.00 % 100.00 % 100.00 %

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Net income 2.19 % 1.88 % 2.16 % 1.69 %

Sales were $519,689 in the 13 weeks ended October 29, 2022, an increase of 5.2% compared to the 13 weeks ended October 30, 2021.

Sales were $563,866 in the 13 weeks ended January 28, 2023, an increase of 4.9% compared to the 13 weeks ended January 29, 2022.

Sales increased due to an increase in same store sales of 3.2%, the opening of a Gourmet Garage in the West Village in Manhattan, NY on April 29, 2022 and increased sales due to the remodel and conversion of the Pelham, NY Fairway to the ShopRite banner on August 15, 2022.

Same store sales increased due primarily to retail price inflation.

Sales were $1,083,555 in the 26 weeks ended January 28, 2023, an increase of 5.0% compared to the 26 weeks ended January 29, 2022.

Sales increased due to an increase in same store sales of 3.7%, the opening of a Gourmet Garage in the West Village in Manhattan, NY on April 29, 2022 and increased sales due to the remodel and conversion of the Pelham, NY Fairway to the ShopRite banner on August 15, 2022.

Same store sales increased due primarily to retail price inflation.

New stores, replacement stores and stores with banner changes 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 .37% in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to increased departmental gross margin percentages (.17%), decreased warehouse assessment charges from Wakefern (.21%) due primarily to sales leverage, a favorable change in product mix (.07%) and lower promotional spending (.06%), partially offset by higher LIFO charges (.05%) and decreased patronage dividends and rebates received from Wakefern (.10%).

Gross profit as a percentage of sales decreased .37% in the 13 weeks ended January 28, 2023 compared to the 13 weeks ended January 29, 2022 due primarily to decreased departmental gross margin percentages (.18%), increased warehouse assessment charges from Wakefern (.11%), higher promotional spending (.11%) and increased LIFO charges (.08%) partially offset by a favorable change in product mix (.04%) and increased patronage dividends and rebates received from Wakefern (.07%).

Gross profit as a percentage of sales decreased .02% in the 26 weeks ended January 28, 2023 compared to the 26 weeks ended January 29, 2022 due primarily to increased LIFO charges (.12%), higher promotional spending (.03%) and decreased patronage dividends and rebates received from Wakefern (.01%) partially offset by increased departmental gross margin percentages (.04%), a favorable change in product mix (.06%) and decreased warehouse assessment charges from Wakefern (.04%).

Operating and Administrative Expense.

Operating and administrative expense as a percentage of sales decreased .38% in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to lower labor costs and fringe benefits (.21%) and decreased supply spending (.15%).

Labor costs and fringe benefits decreased due primarily to ongoing productivity initiatives and sales leverage partially offset by minimum wage and market-driven pay rate increases.

Operating and administrative expense as a percentage of sales decreased .47% in the 13 weeks ended January 28, 2023 compared to the 13 weeks ended January 29, 2022 due primarily to lower labor costs and fringe benefits (.41%) and decreased supply spending (.13%).

Labor costs and fringe benefits decreased due primarily to sales leverage and ongoing productivity initiatives partially offset by minimum wage and market-driven pay rate increases.

Operating and administrative expense as a percentage of sales decreased .42% in the 26 weeks ended January 28, 2023 compared to the 26 weeks ended January 29, 2022 due primarily to lower labor costs and fringe benefits (.30%) and decreased supply spending (.14%).

Labor costs and fringe benefits decreased due primarily to sales leverage and ongoing productivity initiatives partially offset by minimum wage and market-driven pay rate increases.

Depreciation and Amortization .

Depreciation and amortization expense increased in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to capital expenditures.

Depreciation and amortization expense increased in the 13 and 26 weeks ended January 28, 2023 compared to the 13 and 26 weeks ended January 29, 2022 due primarily to capital expenditures.

Interest Expense .

Interest expense increased in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to interest related to the $10,000 unsecured term loan executed on September 1, 2022.

Interest expense increased in the 13 and 26 weeks ended January 28, 2023 compared to the 13 and 26 weeks ended January 29, 2022 due primarily to higher average outstanding debt balances.

Interest Income .

Interest income increased in the 13 weeks ended October 29, 2022 compared to the 13 weeks ended October 30, 2021 due primarily to higher interest rates and larger amounts invested in variable rate notes receivable from Wakefern and demand deposits at Wakefern.

Interest income increased in the 13 and 26 weeks ended January 28, 2023 compared to the 13 and 26 weeks ended January 29, 2022 due primarily to higher interest rates and larger amounts invested in variable rate notes receivable from Wakefern and demand deposits at Wakefern.

Income Taxes.

The effective income tax rate was 31.0% in the 13 weeks ended October 29, 2022 compared to 30.7% in the 13 weeks ended October 30, 2021.

The effective income tax rate was 30.9% in the 13 and 26 weeks ended January 28, 2023 compared to 30.7% in both the 13 and 26 weeks ended January 29, 2022.

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

Net Income was $11,081 in the 13 weeks ended October 29, 2022 compared to net income of $7,328 in the 13 weeks ended October 30, 2021.

Net income increased 51% due primarily to the 4.3% increase in same store sales, higher gross profit margins and lower operating and administrative expenses.

Net Income was $12,322 in the 13 weeks ended January 28, 2023 compared to net income of $10,129 in the 13 weeks ended January 29, 2022.

Net income increased 22% due primarily to the 3.2% increase in same store sales, lower operating and administrative expenses as a percentage of sales and higher interest income.

Net income was $23,405 in the 26 weeks ended January 28, 2023 compared to $17,457 in the 26 weeks ended January 29, 2022.

Net income increased 34% due primarily to the 3.7% increase in same store sales, lower operating and administrative expenses as a percentage of sales and higher interest income.

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 30, 2022.

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

A s of January 28, 2023, 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 $22,019 in the 13 weeks ended October 29, 2022 compared to $7,887 in the corresponding period of the prior year.

The change in cash flows from operating activities in fiscal 2023 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 $756 in fiscal 2023 compared to a decrease of $8,281 in fiscal 2022.

The change in impact of working capital is due primarily to the timing of tax payments, accounts payable and accrued expenses.

During the 13 weeks ended October 29, 2022, Village used cash to fund capital expenditures of $9,813, dividends of $3,252, principal payments of long-term debt of $2,352, an investment in a real estate partnership for the development of a retail center in Old Bridge, New Jersey of $1,276 and additional net investments of $30,917 in notes receivable from Wakefern.

Capital expenditures primarily include costs associated with the remodel and conversion of the Pelham, NY Fairway to the ShopRite banner, the new Gourmet Garage store in the West Village of New York City, continued expansion of self-checkout, and various merchandising, technology, equipment and facility upgrades.

We expect capital expenditures to approximate $70,000 in fiscal 2023.

Planned expenditures include costs for construction of three replacement stores scheduled to open in fiscal 2024, two major remodels, including the conversion of the Pelham, NY store from the Fairway to the ShopRite banner, the purchase of the Vineland store shopping center, several smaller store remodels and merchandising initiatives, installation of electronic shelf labels in six stores, continued expansion of self-checkout, and various technology, equipment and facility upgrades.

The Company’s primary sources of liquidity in fiscal 2023 are expected to be cash and cash equivalents on hand at October 29, 2022 and operating cash flow generated in fiscal 2023.

Net cash provided by operating activities was $48,357 in the 26 weeks ended January 28, 2023 compared to $40,274 in the corresponding period of the prior year.

The change in cash flows from operating activities in fiscal 2023 was primarily due to higher net income adjusted for non-cash items partially offset by changes in working capital.

Working capital changes, including Other assets and liabilities, increased cash flows from operating activities by $4,275 in fiscal 2023 compared to a increase of $4,986 in fiscal 2022.

The change in impact of working capital is due primarily to increased merchandise inventories, the timing of tax payments, accounts payable to Wakefern and accounts payable and accrued expenses .

During the 26 weeks ended January 28, 2023, Village used cash to fund capital expenditures of $28,550, dividends of $6,507, principal payments of long-term debt of $4,903, an investment in a real estate partnership for the development of a retail center in Old Bridge, New Jersey of $3,319 and additional net investments of $32,573 in notes receivable from Wakefern.

Capital expenditures primarily include costs associated with the remodel and conversion of the Pelham, NY Fairway to the ShopRite banner, the new Gourmet Garage store in the West Village of New York City, the purchase of the Vineland store shopping center, installation of electronic shelf labels, continued expansion of self-checkout, and various technology, equipment and facility upgrades.

We have revised our budgeted capital expenditures downward from prior estimates to approximately $60,000 in fiscal 2023 due to the timing of construction spends for replacement stores shifting from fiscal 2023 into fiscal 2024.

expenditures include costs for construction of three replacement stores scheduled to open in fiscal 2024 and fiscal 2025, two major remodels, including the conversion of the Pelham, NY store from the Fairway to the ShopRite banner, the purchase of the Vineland store shopping center, several smaller store remodels and merchandising initiatives, installation of electronic shelf labels in six stores, continued expansion of self-checkout, and various technology, equipment and facility upgrades.

The Company’s primary sources of liquidity in fiscal 2023 are expected to be cash and cash equivalents on hand at January 28, 2023 and operating cash flow generated in fiscal 2023.

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 October 29, 2022, Village has invested $6,286 into the real estate partnership, which is accounted for as an equity method investment included in Investments in Real Estate Partnerships on the Consolidated Balance Sheet.

As of January 28, 2023, Village has invested $8,329 into the real estate partnership, which is accounted for as an equity method investment included in Investments in Real Estate Partnerships on the Consolidated Balance Sheet.

On August 15, 2022, notes receivable due from Wakefern of $28,850 that earned interest at the prime rate plus 1.25% matured.

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On September 28, 2022, the Company invested an additional $30,000 in variable rate notes receivable from Wakefern that earn interest at the prime rate plus .50% and mature on September 28, 2027.

At October 29, 2022, the Company held variable rate notes receivable due from Wakefern of $29,606 that earn interest at the prime rate plus .75% and mature on February 15, 2024, $29,078 that earn interest at the prime rate plus .50% and mature on August 15, 2027 and $30,017 that earn interest at the prime rate plus .50% and mature on September 28, 2027.

At January 28, 2023, the Company held variable rate notes receivable due from Wakefern of $30,171 that earn interest at the prime rate plus .75% and mature on February 15, 2024, $29,615 that earn interest at the prime rate plus .50% and mature on August 15, 2027 and $30,571 that earn interest at the prime rate plus .50% and mature on September 28, 2027.

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 $31,059 at October 29, 2022 compared to $79,796 at July 30, 2022.

Working capital was $34,299 at January 28, 2023 compared to $79,796 at July 30, 2022.

Working capital ratios at the same dates were 1.21 and 1.50 to one, respectively.

The decrease in working capital in fiscal 2023 compared to fiscal 2022 is due primarily to $28,850 in notes receivable from Wakefern that matured on August 15, 2022 and were reinvested in long-term

notes receivable from Wakefern and an additional $30,017 investment in long-term notes receivable from Wakefern.

The decrease in working capital in fiscal 2023 compared to fiscal 2022 is due primarily to $28,850 in notes receivable from Wakefern that matured on August 15, 2022 and were reinvested in long-term notes receivable from Wakefern and an additional $30,017 investment in long-term notes receivable from Wakefern.

The Company’s working capital needs are reduced, since inventories are generally sold by the time payments to Wakefern and other suppliers are due.

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The Company has a credit facility (the “Credit Facility”) with Wells Fargo National Bank, National Association (“Wells Fargo”).

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

The principal purpose of the Credit Facility is to finance general corporate and working capital requirements, Village’s fiscal 2020 acquisition of certain Fairway assets and certain capital expenditures.

Among other things, the Credit Facility provides for:

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An interest rate swap with notional amounts equal to the term loan fixes the base SOFR at 1.41% per annum through January 28, 2037, resulting in a fixed effective interest rate of 2.91% on the term loan.

The term loan is secured by the Galloway store shopping center acquired in the first quarter of fiscal 2022.

The term loan is secured by the Galloway store shopping center acquired for $9,800 in the first quarter of fiscal 2022.

On September 1, 2022, the Company amended the Credit Facility due to the execution of a seven year $10,000 unsecured term loan.

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Net of the subsidy, the Company will pay interest at a fixed effective rate of 2.30%.

Based on current trends, the Company believes cash and cash equivalents on hand at October 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 October 29, 2022 to the contractual obligations and commitments discussed in the Company’s Annual Report on Form 10-K for the year ended July 30, 2022.

On January 27, 2023, the Company purchased the Vineland store shopping center for $9,500.

As part of the purchase, the Company amended the Credit Facility due to the execution of a fifteen year $7,125 term loan secured by the Vineland store shopping center.

The secured term loan is repayable in equal monthly installments based on a fifteen year amortization schedule through January 27, 2038 and bears interest at the applicable SOFR plus 1.75%.

Village also executed an interest rate swap for a notional amount equal to the term loan amount that fixes the base SOFR at 3.59%, resulting in a fixed effective rate of 5.34%.

Based on current trends, the Company believes cash and cash equivalents on hand at January 28, 2023, 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 28, 2023 to the contractual obligations and commitments discussed in the Company’s Annual Report on Form 10-K for the year ended July 30, 2022.

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

12 unchanged sentences

• We expect the increase in same store sales to range from 2.0% to 4.0% in fiscal 2023.

• We have budgeted $70,000 for capital expenditures in fiscal 2023.

• We have revised our budgeted capital expenditures downward from prior estimates to approximately $60,000 in fiscal 2023 due to the timing of construction spends for replacement stores shifting from fiscal 2023 into fiscal 2024.

Planned expenditures include costs for construction of three replacement stores scheduled to open in fiscal 2024 and fiscal 2025, two major remodels, including the conversion of the Pelham, NY store from the Fairway to the ShopRite banner, the purchase of the Vineland store shopping center, several smaller store remodels and merchandising initiatives, installation of electronic shelf labels in six stores, continued expansion of self-checkout, and various technology, equipment and facility upgrades.

• The Board’s current intention is to continue to pay quarterly dividends in 2023 at the most recent rate of $.25 per Class A and $.1625 per Class B share.

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• Village purchases substantially all of its merchandise from Wakefern.

In addition, Wakefern provides the Company with support services in numerous areas including advertising, workers' compensation, liability and property insurance, supplies, certain equipment purchasing, coupon processing, certain financial accounting applications, retail technology

support, and other store services.

Further, Village receives patronage dividends and other product incentives from Wakefern and also has demand deposits and notes receivable due from Wakefern.

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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