The Penn Traffic Company, operater of 216 supermarkets under the “Big Bear”, “Big Bear Plus”, “Bi-Lo”, “P&C” and “Quality” banners, has announced net income of US$1.1m (US$0.06/diluted share) for the Q1 of Fiscal 2003, ended 4 May 2002, compared to adjusted net income of US$0.2m (US$0.01/diluted share) in the prior year.
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Net income for the Q1 2002, ended 5 May 2001, was adjusted to exclude amortisation of excess reorganisation value. Excluding this adjustment, the company reported a net loss of US$27.1m (US$1.35/diluted share) in the prior year.
EBITDA for the Q1 2003 was US$21.7m, an increase of 1.5% over the prior year’s US$21.4m level. Same store sales meanwhile increased 0.6% from the comparable prior year period. Revenues for the Q1 2003 fell 0.5% to US$576.4m from US$579.1m in the prior year.
“We are pleased with our same store sales performance in the Q1 which was achieved despite a challenging economic and competitive environment,” said Joseph V. Fisher, president and CEO. “We continue to make steady progress in growing our sales and earnings.”
According to Fisher, the key factors leading to the growth in Penn Traffic’s earnings in the quarter were:
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By GlobalData*An increase in same store sales
*An improvement in gross profit margins
*The benefits of cost reduction programs
*A decrease in interest expense.
“These trends more than offset substantial increases in wage, healthcare and pension costs in this period of little or no food price inflation,” said Fisher: “We are pleased that we were able to achieve increased gross profit margins in the quarter.
“More efficient promotions, facilitated by the Company’s loyalty card programme, increased sales of private label products and a reduction in inventory shrink contributed to the increase in gross profit margins.”
Penn Traffic reported that it has begun to introduce merchandising programmes using its Wild Card loyalty card to specifically target the needs of certain market segments. The company recently introduced the Baby Club across its markets. Penn Traffic will introduce a similar Kids Club programme in its stores later in the year.
“We designed these programmes to increase the number of loyal shoppers we have among families with children at home,” said Fisher.
During Fiscal 2003, Penn Traffic is continuing to make cost reduction and cost containment a major priority across all of its stores and support functions, while placing a special focus on reducing costs in two areas; perishable shrink reduction and the supply chain.
“While we’ve made enormous strides in reducing our cost structure, containing costs is a never-ending challenge for any supermarket company,” said Fisher.
Penn Traffic released details of its Fiscal 2003 capital investment programme, which will total about US$65m. “Given the significant investment we have made in our store base over the last few years, we are shifting the focus toward growing our business through the construction of new and replacement stores,” said Martin A. Fox, executive VP and CFO.
“In addition to opening five new stores and expanding one store this year, we also expect to remodel 14 stores,” said Fox.
Fox also reported that Penn Traffic has completed installation of new point-of-sale (POS) system units in four pilot stores. In the H2, the company plans to begin a system-wide implementation of the new POS system, which should enhance customer service, increase labour productivity, improve shrink control, generate important data on consumer behaviour and enable Penn Traffic to implement a greater variety of merchandising programmes.
Penn Traffic also indicated that it continues to expect to achieve positive same store sales and earnings growth in Fiscal 2003. “Although the competitive environment remains challenging, we believe that by relentlessly pursuing our business plan, we will continue to make progress in our financial results,” said Fisher.
