Executive Summary

Q4 2018 sales rose 0.7% year over year to $413.551M, driven by the Bronx, NY store opening; same-store sales fell 0.3% due to two competitor openings, while gross margin ticked up 17 bps to 27.56% .
Net income declined to $6.011M vs $6.805M YoY; diluted EPS (Class A) was $0.42 vs $0.47 YoY, pressured by higher operating and administrative expenses (23.80% of sales vs 22.99% YoY), partially offset by tax-rate benefits from the Tax Cuts and Jobs Act .
FY2019 outlook: same-store sales expected +0.5% to +2.5%; capex budget $40M (Stroudsburg replacement, self-checkout expansion); expected effective tax rate 30–31%; Board intends to continue quarterly dividends at $0.25 (Class A) and $0.1625 (Class B) per share .
Wall Street consensus estimates from S&P Global were unavailable at the time of request; therefore, no beat/miss analysis vs estimates can be provided.

What Went Well and What Went Wrong

What Went Well

“Sales increased due to the opening of the Bronx, New York City store on June 28, 2018” supporting a modest top-line increase in Q4 despite negative comps .
“Gross profit as a percentage of sales increased to 27.56%…due primarily to increased departmental gross margin percentages (.11%) and more favorable product mix (.03%)” indicating positive mix and margin management .
Effective tax-rate tailwind: excluding special items, the FY2018 effective tax rate fell to 33.7% from the Tax Cuts and Jobs Act, benefiting Q4 and FY results .

What Went Wrong

Same-store sales declined 0.3% in Q4, attributed “primarily to two competitor store openings,” evidencing local market share pressure .
Operating and administrative expense rose to 23.80% of sales (vs 22.99% YoY), driven by payroll investments, consulting fees for operational initiatives, Bronx pre-opening costs, Wakefern assessments, and higher workers’ compensation claims, compressing operating income ($9.254M vs $11.930M YoY) .
Net income fell 11.7% YoY and diluted Class A EPS decreased to $0.42 from $0.47, reflecting expense headwinds despite modest sales growth .

Financial Results

Q4 Year-over-Year Comparison

Metric	Q4 2017	Q4 2018
Sales ($USD Millions)	$410.683	$413.551
Gross Profit ($USD Millions)	$112.489	$113.961
Gross Margin (%)	27.39%	27.56%
Operating & Administrative Expense (% of Sales)	22.99%	23.80%
Operating Income ($USD Millions)	$11.930	$9.254
Net Income ($USD Millions)	$6.805	$6.011
Diluted EPS – Class A ($)	$0.47	$0.42
Diluted EPS – Class B ($)	$0.34	$0.30
Same-Store Sales (%)	—	-0.3%

Note: Same-store sales YoY change is disclosed for Q4 2018; Q4 2017 not disclosed in press release.

Quarterly Trend (FY2018)

Metric	Q2 2018	Q3 2018	Q4 2018
Sales ($USD Millions)	$417.382	$394.608	$413.551
Gross Profit ($USD Millions)	$112.285	$108.877	$113.961
Net Income ($USD Millions)	$9.511	$6.542	$6.011
Diluted EPS – Class A ($)	$0.66	$0.45	$0.42

Segment/Product Mix (FY context)

Category (% of Sales)	FY 2016	FY 2017	FY 2018
Groceries	36.1%	36.3%	36.3%
Dairy & Frozen	17.0%	16.8%	16.9%
Produce	12.1%	12.1%	12.1%
Meats	10.2%	10.0%	9.9%
Non-Foods	8.4%	8.4%	8.3%
Deli & Prepared Foods	6.8%	7.0%	7.2%
Pharmacy	4.5%	4.5%	4.3%
Seafood	2.4%	2.4%	2.5%
Bakery	2.1%	2.1%	2.1%
Liquor	0.4%	0.4%	0.4%

KPIs

KPI	Value
Same-Store Sales (Q4 2018)	-0.3%
Same-Store Sales (FY2018)	+0.2%
Store Count (FY2018)	30
Total Square Feet (FY2018)	1,770,000
Sales per Avg Store (FY2018, excl. Bronx)	$55,450

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Same-Store Sales Growth	FY2019	N/A	+0.5% to +2.5%	New
Capital Expenditures	FY2019	N/A	$40.0M; Stroudsburg replacement, self-checkout expansion, tech/equipment upgrades	New
Effective Tax Rate	FY2019	N/A	30%–31% (reflecting full 21% federal rate, partially offset by NJ A4202)	New
Quarterly Dividend (Class A)	Q4 2018 Payable Oct 25, 2018	N/A	$0.25 per share	Maintained
Quarterly Dividend (Class B)	Q4 2018 Payable Oct 25, 2018	N/A	$0.1625 per share	Maintained

Earnings Call Themes & Trends

Note: No public earnings-call transcript was located in the document catalog for Q4 2018; themes are derived from press release and 10-K disclosures.

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q4 2018)	Trend
Competitive intensity and store openings	Industry remains “highly competitive and characterized by narrow profit margins” ; competitive landscape includes major national/regional players .	Same-store sales decreased “due primarily to two competitor store openings” .	Heightened local competitive pressure in Q4.
Margin mix management	Focus on higher-margin specialty departments and product mix (prepared foods, private label) .	Gross margin up to 27.56% on departmental margin gains and favorable mix .	Positive mix contribution continues.
Operational proficiency initiatives	Ongoing investments in operations and technology; ShopRite from Home and store remodels .	Non-recurring consulting fees tied to “launch of operational proficiency initiatives” increased opex .	Near-term cost headwind to support medium-term efficiency.
Tax and regulatory environment	Tax Act impacts recognized (blended rate, bonus depreciation) .	Lower effective tax rate (ex-deferred) to 33.7% aids earnings .	Structural tax-rate tailwind.
Wakefern dependence and patronage dividends	Wakefern is principal supplier; patronage dividends integral to COGS; risks if Wakefern’s operations change .	Slightly lower patronage dividends noted in gross margin bridge (-0.04%) .	Small negative impact in period.
Labor costs and pensions	Large unionized workforce; pension cost sensitivity disclosed .	Payroll investments increased opex; multi-employer pension credit provided partial offset .	Wage investments up; pension credit one-time relief.

Management Commentary

“Sales increased due to the opening of the Bronx, New York City store on June 28, 2018 partially offset by a decrease in same store sales of 0.3%. Same store sales decreased due primarily to two competitor store openings.” (Press release, Oct 8, 2018) .
“Gross profit as a percentage of sales increased to 27.56%…due primarily to increased departmental gross margin percentages (.11%) and more favorable product mix (.03%).” (Press release) .
“Operating and administrative expense as a percentage of sales increased…due primarily to payroll investments…internal payroll…non-recurring external consulting fees…pre-opening costs for the Bronx…non-recurring assessments from Wakefern…and increased worker compensation claim costs…partially offset by a non-recurring credit accrued related to multi-employer pension benefits (.30%).” (Press release) .
“Excluding [special] items, net income decreased 6%…primarily due to higher operating and administrative expenses partially offset by the favorable impact of a reduction in the fiscal 2018 effective tax rate to 33.7% as a result of the Tax Act.” (Press release) .

Q&A Highlights

No call transcript available in the document catalog for Q4 2018; guidance clarifications are sourced from 10-K Outlook (FY2019 expectations) .

Estimates Context

S&P Global consensus estimates for Q4 2018 (Revenue and Primary EPS) and the prior two quarters (Q3 and Q2 2018) were unavailable at the time of request due to data access limitations; as a result, comparison to Wall Street estimates could not be performed.

Key Takeaways for Investors

Near-term margin execution was solid, but elevated opex (service payroll, consulting, pre-opening, assessments, workers’ comp) compressed operating income; monitor expense normalization post-Bronx ramp and completion of operational initiatives .
Competitive openings negatively impacted Q4 comps (-0.3%); watch local competitive dynamics and comp trajectory against FY2019 same-store guidance (+0.5% to +2.5%) for early signs of recovery .
Structural tax-rate benefits (Tax Act) lower the effective tax burden; FY2019 effective tax rate guided to 30–31%—supportive to EPS if operating costs are contained .
Mix tailwinds (departmental margin and product mix) helped lift gross margin; continued emphasis on prepared foods/private label and “Power Alley” can sustain margin resilience .
Dividend continuity (Class A: $0.25; Class B: $0.1625) underscores capital return discipline amid growth capex ($40M budget) for store projects and self-checkout expansion—evaluate cash generation vs capex plan .
Wakefern dependence remains a critical variable; patronage dividends and service provisioning impact margins and operations—track any changes in Wakefern’s policies or performance .
Positioning for medium term: Bronx store maturation, Stroudsburg replacement, and operational proficiency initiatives should support sales and efficiency, but near-term opex volatility warrants cautious EPS expectations until normalization is evident .

VILLAGE SUPER MARKET INC (VLGEA)·Q4 2018 Earnings Summary