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I'm Still Cautious On Village Super Market

William Bias profile picture
William Bias


  • Village Super Market’s stock outperformed the market over the past 14 months due to successful turnaround efforts.
  • Village Super Market’s dividend hasn’t been internally sustained in the past two years.
  • Village Super Market operates in a hyper competitive industry.

About 14 months ago, I published my first article about supermarket chain Village Super Market (NASDAQ: NASDAQ:VLGEA), which currently operates 29 grocery stores under the "Shoprite" name. In that article, I said that investors should stay away from Village Super Market due to its lousy fundamentals, unsustainable dividend and disadvantageous position relative to big box retailers such as Wal-Mart (NYSE: WMT). Village Super Market's stock advanced 17% vs. 8% for the S&P 500 during the past 14 months (see chart below). Let's examine.

VLGEA Total Return Price Chart

VLGEA Total Return Price data by YCharts

Where's the cash?

In FY 2015, Village Super Market saw an improvement in its revenue and net income of 4% and 507%, respectively, year-over-year. However, Village Super Market saw a free cash flow deficit of $6 million in FY 2015 vs. a positive free cash flow reading of $2 million in FY 2014. Comparable store sales increased 2%. Higher customer traffic and the fact that those customers spent more at those stores demonstrate Village Super Market's ability to bring customers back through the doors and keep them engaged. The reopening of remodeled stores also contributed to top line expansion. Village Super Market got past some taxation issues and experienced lower income taxes, which contributed to higher net income. The settlement of income tax issues with the New Jersey Division of Taxation contributed to the negative free cash flow reading.

Village Super Market's balance sheet remains in good shape. Its cash equates to 23% of stockholder's equity vs. 31% of stockholder's equity when I wrote about it 14 months ago. The company still possesses no long-term debt, other than capital and financing lease obligations and a small note payable, which equate to 18% of stockholder's equity. I like to see companies with long-term debt equating to less than 50% of stockholder's equity.

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: I am/we are long WMT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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