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Roundy's: Positive Expectations for 'Milwaukee Renewal'

MILWAUKEE — Roundy's Supermarkets here said Thursday it believes it can bring comparable-store sales close to positive as a result of expanding its new pricing and service initiatives to all Pick 'n Save stores after testing those initiatives at 14 stores for the past nine months.

According to Bob Mariano, chairman and chief executive officer, the 14 test stores "have achieved almost positive comps, and we are energized enough by those results that we think we can turn results to slightly positive at the other Milwaukee stores despite operating in a tough, low-inflation environment — but it will be slow going."


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Roundy's converted 19 stores as part of the "Milwaukee Renewal" program during the second quarter and the remaining 36 during the third quarter, "so the metrics are not yet meaningful, though the early numbers are encouraging," Mariano said.

Talking with financial analysts, Mariano also said Roundy's is reviewing its options in the Chicago market, where it operates 13 upscale Mariano's stores and where Safeway has put the entire Dominick's chain up for sale. "We are reviewing the stores and determining which ones fit our strategic plan," he said. "We're also analyzing our own capital requirements. The review is ongoing, and when we have more to say, we will let you know."

Pressed by one analyst on whether Roundy's has the financial and management resources to expand Mariano's beyond its current goal of opening five stores a year, Mariano said, "Any conclusions would only be conjecture. But in terms of personnel, we've been able to do what we've done in Chicago by acquiring external talent and moving the internal talent we have, so we have a strong bench."

Read more: Roundy's Counts on Store Upgrades

He made his comments during a conference call to discuss financial results for the third quarter and 39 weeks ended Sept. 28.  Net income for the 13-week quarter declined 52.3% to $3.8 million, while sales grew 1.1% to $984.2 million and comps declined 3.7%. For the year to date, net income dropped 11.1% to $25.9 million, while sales increased 1.4% to $3 billion and comps fell 2.8%.

The company said the earnings declines resulted from incremental marketing and advertising expenses associated with the renewal effort in Milwaukee and higher promotional activities; the sales increases reflected the benefit of opening two more Mariano's; and the comps fell due to competitive store openings, a shift to more generic pharmacy sales and the weak economic environment.

"Despite headwinds, our sales cadence improved throughout the quarter, and this has continued into the fourth quarter," Mariano said.  "These results give us confidence that our customer-centric initiatives are resonating with consumers, and we believe we are making the right long-term decisions to stabilize our core markets and position us more positively heading into 2014."

He said mature Mariano's stores average $1 million in sales per week, while new stores open with weekly sales in the range of $750,000 to $800,000 and move up from there.

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