Low inflation, a weak Canadian dollar and unseasonably warm weather slowed comparable store sales growth in the fourth quarter and fiscal year ended Jan. 2, parent Tops Holding II said in a release. And while sales margins increased, higher expenses led to increased net losses in the quarter and fiscal year.
Sales for the 13-week fourth quarter increased 7.3% to $570.3 million as compared to the 12-week fourth quarter in fiscal 2014, Tops said. Excluding the effect of the extra week, sales decreased by 0.8% and comps decreased by 0.9%.
Sales totals reflected around $10 million from new and acquired stores offset by an $8.4 million decrease in sales attributable to 27 in-store pharmacies closed a year ago.
Gross profit for the fourth quarter totaled 29.6% of net sales, a 170 basis-point increase from last year, reflecting better margins on fuel sales and savings associated with the amendment of certain operating terms of Tops' procurement agreement with C&S Wholesale Grocers, which went into effect in April.
For the 53-week fiscal year, inside sales of $2.3 billion increased 1.3% vs. the 52-week fiscal 2014, reflecting $43.4 million of sales related to the additional week in fiscal 2015 and the $28.3 million incremental contribution from acquired and new locations opened since June 2014. Partially offsetting these increases was a $33.3 million reduction in pharmacy sales.
Same-store sales were down 30 basis points on a comparable 52-week basis, excluding sales from the 27 closed in-store pharmacies in both years. Fuel sales declined 29.6% to $157.9 million due to a 31.9% decrease in the average retail price per gallon, partially offset by a 3.3% increase in the number of gallons sold. Overall, fiscal 2015 net sales were $2.5 billion, down 1.4% from the prior-year period.
“We continued to make progress in 2015. We added five new locations during the year, completed a number of significant and minor store remodels, upgraded our POS system, and importantly, ended the year with encouraging market share trends throughout our footprint. We also greatly enhanced our financial flexibility as we completed our debt refinancing earlier in the year,” said Frank Curci, chairman and CEO of the Williamsville, N.Y., company. “The year was not without its challenges, with historically low inflation, the weak Canadian dollar, which significantly reduced the number of Canadian shoppers at stores in our Buffalo/Niagara market area, and unseasonably warm weather, which allowed for more mobility and eating out during the fourth quarter. Despite those headwinds, we continued to execute our strategy as we generated significant cash to support our debt pay down and growth initiatives.”
Expenses increased for the fourth quarter and the fiscal year, reflecting a minimum wage hike in New York, higher bonuses, and expenses incurred to settle a labor dispute. Tops also incurred a debt extinguishment expense. As a result net loss for the quarter and year increased to $15.4 million and $62.2 million, respectively.
Curci said Tops would continue to drive its strategy and focus on debt reduction during 2016.
“Despite some of the top line challenges we faced in 2015 continuing into 2016, fill-in acquisitions, continued growth from recent additions to our portfolio of supermarkets, and a number of merchandising and marketing initiatives are expected to drive overall growth.”
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