Harris Teeter has seen its full year operating profits fall, despite a sales rise in the 12 months, impacted by new store opening costs, retail price deflation and promotional price investments.
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The US retail group said sales for fiscal 2009 increased by 4.4% to US$3.83bn. Sales for the fourth quarter of fiscal 2009 were $984.5m, an increase of 3.8%.
The increase in sales for both the year and fiscal fourth quarter was attributable to incremental new stores and was partially offset by comparable store sales declines of 1.49% for the year and 2.44% for the fourth quarter.
“Comparable store sales were negatively impacted by retail price deflation and, to some extent, the cannibalisation created by strategically opening stores in key major markets that have a close proximity to existing stores,” the company said. “In addition, Harris Teeter customers, in these economic times, are choosing our lower priced store branded products and reducing their purchases of more discretionary categories such as floral, tobacco, and certain general merchandise.”
Harris Teeter said it opened 15 new stores (including two replacements), closed two older stores and completed the major remodeling of three stores (one of which was expanded in size) in the year.
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By GlobalDataOperating profit at Harris Teeter for the year fell to $175.6m from $177.8m in fiscal 2008. However, operating profit for the fourth quarter of fiscal 2009 increased to $43.5m from $42.6m last year.
Operating profit was impacted by new store pre-opening costs of $14.4m and $15.4m in fiscal 2009 and 2008, respectively.
“The decrease in Harris Teeter’s operating profit for fiscal 2009 resulted primarily from retail price deflation and promotional price investments made to enhance the overall value we provide to our customers,” a statement from the company said.
Thomas Dickson, chairman of the board, president and CEO of Harris Teeter owner Ruddick Corporation said: “I am encouraged by the refinements we are making to our merchandising strategies during these times of economic uncertainty and constantly changing consumer shopping behaviour. We made investments in promotional activity, as well as price, to drive customer shopping visits and loyalty, while remaining focused on enhancing the overall value we deliver to our customers. We delivered positive comparable store customer shopping visits and items sold in the fourth quarter.”
During fiscal 2010, Harris Teeter plans to open 13 new stores (two of which will be replacements for existing stores) and complete two major remodels. The new store development programme for fiscal 2010 is expected to result in a 6.8% increase in retail square footage as compared to an 8.7% increase in fiscal 2009.
“The company’s management remains cautious in its expectations for fiscal 2010 due to the current economic environment and its impact on the company’s customers,” Ruddick, which also owns a thread company A&E, concluded. “The retail grocery market remains intensely competitive and the textile and apparel environment faces additional challenges during this recessionary period.
“Any operating improvement will be dependent on the company’s ability to continue to increase Harris Teeter’s market share, rationalise A&E’s operations, offset increased operating costs with additional operating efficiencies, and to effectively execute the company’s strategic expansion plans.”
