Eastern U.S. supermarket chain Weis Markets (NYSE:WMK) posted second quarter profit that was essentially unchanged from the same quarter a year ago. The company increased its revenue, as well as same-store sales. The grocery store operator recently announced price cuts with a promise of maintaining these cuts for three months while competitors increase prices due to the rising cost of agriculture prices over all channels. (To help you battle rising food prices, check out 22 Ways To Fight Rising Food Prices.)

TUTORIAL: Commodities

A Better Quarter Than It Appears
Revenue for the quarter was $676.7 million, an increase of 3.5% from the same quarter a year ago, when revenue was $653.7 million. Net income was essentially flat, at $20.7 million or 77-cents per share, up slightly from $20.5 million or 76-cents per share.

Weis Markets' CEO David Hepfinger pointed out that this quarter's results were achieved despite difficult comparisons against last year's record second quarter results, when the company posted a 35% earnings increase. Grand openings in three key markets for the Pennsylvania-based chain were cited as contributing to this year's quarter's positive results. Also, productivity increases as well as efficiencies helped achieve the results.

Food Inflation and Grocers
A recent report by the Bureau of Labor Statistics said that total expenditures for food at grocery stores rose 4.8 percent in the last year, as grocers passed on the price increases for food commodities such as corn, sugar, rice and oats. These food commodities have risen in price over 60% in the last 12 months. The 4.8% rise in the last 12 months is the largest increase since 2004, excluding the financial crisis of 2008-2009. While the increase during the financial crisis was a temporary spike, this increase has been steadily trending up in the last 12 months. The recent report of 4.8% follows a May report which had the annual increase at 4.4%. (If you are interested in investing in the commodities world, read How To Invest In Commodities.)

Pass It on
Most grocers and supermarket chains have been passing along the commodity price increases to consumers. Safeway (NYSE:SWY), Kroger (NYSE:KR) as well as higher-line Whole Foods Markets (NYSE:WFM) are three such chains whose stocks have benefited from this. Others, such as Winn-Dixie (Nasdaq:WINN) have been uneven, while Supervalu (NYSE:SVU) continues to struggle. Weis Markets, however, has been trying a different strategy. The company's recently-announced price cuts come with the pledge to hold the line on these new prices for three months. This is the seventh time in the past two-and-a-half years the company has done this.

The Bottom Line
Weis Markets carries no long-term debt and had cash and short-term investments totaling $139 million at the end of 2010. It has increased cash from operating activities in four of the last five years, and increased its free cash flow in each of the last five. It has increased revenue steadily from 2006 through 2010, from approximately $2.2 billion to $2.6 billion, despite going through the recession. Net income has risen in the last two years. Despite the steady, commendable results, Weis Markets' stock price has not quite seen the levels it reached prior to the recession. This is a company with a billion-dollar market cap that's not nearly as well-known as some of the bigger names in the space, but it manages to produce solid results in a difficult industry where margins are easily pressed. It's well positioned going forward to compete in its niche. (To learn more about grocery store stock, check out Evaluating Grocery Store Stocks.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  2. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  3. Mutual Funds & ETFs

    ETF Analysis: WisdomTree SmallCap Earnings

    Discover the WisdomTree Small Cap Earnings ETF, a fund with a special focus on small-cap and micro-cap stocks with positive earnings.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares US Regional Banks

    Obtain information and analysis of the iShares US Regional Banks ETF for investors seeking particular exposure to regional bank stocks.
  5. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  6. Technical Indicators

    Key Financial Ratios to Analyze the Mining Industry

    Discover some the most important financial ratios used by investors and analysts to evaluate companies in the metals and mining industry.
  7. Technical Indicators

    Key Financial Ratios to Analyze Retail Banks

    Learn about key financial metrics that investors use to evaluate retail banks, and how the industry is fundamentally different from most other industries.
  8. Technical Indicators

    Key Financial Ratios to Analyze Airline Companies

    Examine some of the most important financial ratios and performance metrics investors use to evaluate companies in the airline industry.
  9. Stock Analysis

    The 5 Biggest Canadian Oil Companies

    Obtain information about some of the largest and most successful major integrated oil corporations that are headquartered in Canada.
  10. Technical Indicators

    Key Financial Ratios to Analyze Tech Companies

    Understand the technology industry and the companies that operate in it. Learn about the key financial ratios used to analyze tech companies.
RELATED TERMS
  1. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  3. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  4. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  5. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
  6. Long-Term Debt

    Long-term debt consists of loans and financial obligations lasting ...
RELATED FAQS
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!