Roundy's Shares Offer Fair Value

Midwestern grocery store chain Roundy's (RNDY) reported solid fourth-quarter results late last week. Sales from its stores, which operate under several banners in Wisconsin, Minnesota, and Illinois, increased 1.4% year-over-year to $982 million, roughly in line with consensus expectations. Earnings were not as strong, falling 37% year-over-year to $0.19 per share -- a figure that excludes the impact of a few one-time events.

The trend we saw at Roundy's throughout 2012 continued in the fourth quarter: Its Mariano's chain in Chicago did fantastically well, exceeding sales and profit expectations while posting double-digit same-store sales growth. The core business in Minnesota and Wisconsin, however, continued to struggle, dragging total same-store sales down 2.1%. The latter region, once underserved by Target (TGT) and Wal-Mart (WMT), is now seeing an onslaught of new competition. Even more discouraging, in our view, was the 3.5% drop in traffic at Roundy's stores....296 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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