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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shareholders of grocery store operator Roundy's (NYSE: RNDY ) are in desperate need of a cleanup in aisle four following the company's first-quarter earnings report, which had shares down as much as 20% earlier in the trading day.
So what: Apparently, someone forgot to double-bag the results. For the quarter, Roundy's reported a 2.4% decline in sales to 938.2 million as same-store sales fell 2.1%. The company actually cited the Green Bay Packers' early playoff exit as part of the reason its results were weak. Profits came in at $0.06 versus $0.29 in the year earlier and are lower because of an $8.4 million debt repayment. The big news, however, was Roundy's forecast that sales would increase 2.5% to 3.5% but that same-store sales would continue to decline by 0.5% to 1.5%. Increased competition and a weak spending environment appear to be the primary culprits hurting its existing stores.
Now what: Grocery stores are a low-margin business and there isn't much room, or forgiveness, in investors' hearts for blaming weakness on the Green Bay Packers. Traditional grocers are having a rough go of things as consumers are either trading down to dollar stores like Family Dollar (NYSE: FDO ) , which reported a 4.5% rise in comparable-store sales in late March thanks to increased traffic, or trading up to organic food chains like Whole Foods Market (NYSE: WFM ) , which just recently reported a nearly 14% rise in revenue. Until Roundy's can address its high debt situation and get its existing stores growing again, I don't have any interest in the stock, even after today's large drop.
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