As far as grocers go, Roundy's (NYSE:RNDY) might be the toughest to pin down to those unfamiliar with the company.  Many grocers occupy either the super-low-end, the natural/organic high-end, or somewhere in between.  For decades, Roundy's has dominated the food scene in Wisconsin and Minnesota with its Copps and Pick 'n Save brand stores occupying the middle area.

But over the past 10 years, these chains have lost a massive portion of market share -- most notably to Wal-Mart, which now accounts for an astounding one-fourth of all food purchases in the United States.

While those legacy chains, which now account for 92% of all Roundy's locations, have continued to struggle, the company has introduced a new natural/organic brand -- Mariano's Fresh Market -- to the Chicago area that has been doing quite well.

Screen Shot

Source: Roundy's. 

In order to sort through these differing businesses, there are three key things investors should look for when the company reports earnings this Wednesday.

First, the easy stuff: Did it meet estimates?
While it's certainly not the most important metric to long-term investors, Roundy's ability to match or exceed analyst expectations will go a long way in determining how the stock responds when the market opens on Thursday.

Here's what Wall Street expects:

Q4 Expected Revenue (millions)

Q4 Expected EPS

2014 Expected Revenue (millions)

2014 Expected EPS





Source: E*Trade.

Meeting those expectations would represent a 1.8% uptick in revenue and a 20% decline in earnings during the fourth quarter.  Much of that has to do with the company's plans to expand in Chicago (more on that below). That's why forward projections for 2014 -- in which the company hopes to turn a greater profit -- will be so important for short-term traders.

Second, dig into same-store sales
As you might expect based on my introduction, Roundy's is a tale of two different grocers. The legacy brands have continually underperformed since going public -- bringing in same-store sales that are shrinking. Mariano's, on the other hand, has helped make the picture look less bleak.

For instance, last quarter, companywide same-store sales shrunk 2.8% and overall traffic was down almost 5%.   It's hard to imagine how much worse those numbers would have been if not for Mariano's, where each of the 11 locations averages more than $1 million in sales per week. Zooming out to its two years as a public company, Roundy's has only had one quarter in which same-store sales actually grew.

One of two things needs to happen to turn this story around. Either same-store sales at Roundy's legacy chains could stabilize, or Mariano's needs to grow fast enough to more than make up for the sagging results at Pick 'n Save and Copps.

Either way, it would be enormously positive news if same-store sales were flat over the last quarter.

Finally, let's listen in on the call
Something very important happened last year: Safeway decided to exit the Chicago market and sell off its Dominick's brand stores. That meant Roundy's -- which had planned on opening five to eight new Mariano's stores per year until it reached 30 in the area -- could greatly accelerate its expansion effort.

Indeed, in December, Roundy's announced that it would suspend its dividend and offer more shares to the public so that the company could purchase 11 of the former Dominick's locations for roughly $36 million.

But Mariano's won't be alone. Whole Foods Market, which caters to the same clientele as Mariano's and has an even greater presence in the greater Chicagoland area, also snatched up seven former Dominick's locations.

Listen in to see if the Mariano's stores due to open by the end of 2014 are on schedule, and what pressure, if any, the company is feeling from Whole Foods.

Roundy's could be great, but there are better growth stories out there
While Roundy's could end up being a great stock to own for the long term, I'm not too keen on management, or the fact that more than half of the stores are losing business.  

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John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Brian Stoffel owns shares of Whole Foods Market. The Motley Fool recommends and owns shares of Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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