Weis Markets 3Q results include higher earnings, lower sales

Weis Markets announced its third quarter earnings recently, which were highlighted by a 1.2% increase in net income to $17.2 million.

In addition:

• Earnings per share increased 1.6% to $0.64 per share as compared to the same period one year ago.
• Operating income increased 1.3% to $26.5 million.
• Sales decreased 1.5% to $668.4 million.
• Comparable store sales decreased 1.7%.

According to the company, net income and operating income increases were due to its continuing focus on disciplined promotions and marketing, increased store-level productivity, improved operational and supply chain efficiencies, and a decrease in depreciation expenses.

The decrease in sales was attributed to spikes in sales in the third quarter of 2011 as a result of Hurricane Irene and Lee. Weis also pointed to higher gas prices as well as cautious consumer spending due to high unemployment in Northeastern Pennsylvania, New York's Southern Tier, and parts of Central Pennsylvania.

For the year-to-date, the company's sales were down 0.4% and comparable store sales were down 0.2% as compared to the same period one year ago. Net income rose 7.3% and operating income rose 7.1%.

Hurricanes increase wine sales, not kiosks

Before we get to the hurricane, let's talk about the wine kiosks...

According to a special performance audit by PA Attorney General Jack Wagner, the Liquor Control Board's wine kiosk program has fallen short of established goals. Currently there are 22 kiosks operating in supermarkets owned by Giant Eagle, Giant Food Stores, ShopRite, The Fresh Grocer and Shop 'n Save. Wegmans had several kiosks but recently ended its participation in the program, and Wal-Mart announced last week that they would not install 23 kiosks in its stores, as previously planned.

Wagner's report states the following:

• From 1/29/09 through 3/31/11, the kiosks showed net income of $206,060 with total operating costs of $1,131,375.
• 20 of the 32 kiosks that were operating during the audit period failed to meet the minimum weekly sales threshold.
• All kiosks had to be shut down in the height of last year's holiday season due to mechanical and technological malfunctions.
• 919 malfunctions were reported in a six month period last year, and 118 additional malfunctions were reported in the one-month period after the original malfunctions were repaired.

The report also suggests that the Liquor Control Board (PLCB) "take immediate steps to terminate its contract with Simple Brands LLC of Conshohocken if kiosk operations cannot be modified to meet the originally stated objectives."

Now, about the hurricane... The Philadelphia Inquirer reported yesterday that liquor store sales saw a large spike in the days leading up to Hurricane Irene. According to the PLCB, sales for the week ended Saturday (8/27) were $37 million, which is up $5 million (15%) over the same week a year earlier. Sales for Bacardi's Hurricane mix? Up 311%.

The sales increase for the two days prior to the hurricane were undoubtedly far greater than the overall weekly increase, although the PLCB only shared the weekly numbers. There are no stats currently available that quantify the aspirin intake on the following mornings.