Same Store Sales Increase 2.3 Percent
SYRACUSE, N.Y.–(BUSINESS WIRE)–The Penn Traffic Company (Nasdaq: PNFT – news) today announced that Adjusted EBITDA for the third quarter of Fiscal 2002 (the 13-week period ended November 3, 2001) was $24.5 million, an increase of 13.0 percent over the prior year’s adjusted $21.7 million level. EBITDA has been adjusted to exclude loyalty card startup costs in the third quarters of Fiscal 2001 and Fiscal 2002 and startup costs and operating losses associated with the commencement of operation of the Company’s New England stores in the third quarter of Fiscal 2001. Excluding these adjustments, EBITDA for the third quarter was $22.2 million, a 13.4 percent increase over the prior year’s $19.5 million level.
Adjusted net income was $2.3 million or $0.12 per share in the third quarter of Fiscal 2002 compared to $0.3 million or $0.01 per share in the prior year. Net income has been adjusted to exclude amortization of excess reorganization value and loyalty card startup costs in both years; and an unusual item, New England store startup costs and operating losses and New England lease income in Fiscal 2001. In accordance with the implementation of a new accounting standard, Penn Traffic does not expect to record amortization of excess reorganization value, a noncash charge, after the end of Fiscal 2002 (February 2, 2002).
Revenues for the third quarter of Fiscal 2002 increased approximately 2.3 percent to $598.8 million from $585.4 million in the prior year. Same store sales for the third quarter increased 2.3 percent from the comparable prior year period. The Company’s financial results reflect the Company’s implementation of the new accounting standard, EITF Issue Number 00-14, “Accounting for Certain Sales Incentives,” in the third quarter of Fiscal 2002 including the reclassification of the prior year’s financial statements for comparability purposes.
“We are very pleased with our strong financial performance in the third quarter and the first nine months of this fiscal year,” said Joseph V. Fisher, Penn Traffic’s President and Chief Executive Officer. “We believe that the Company’s continuing positive momentum is a direct result of the efforts of our management and associates in implementing our business plan and improving our operations.”
Mr. Fisher reviewed the key components of Penn Traffic’s business plan that are driving the Company’s improved sales and profitability:
Marketing and merchandising programs such as the Company’s Wild Card customer loyalty program and branded programs in all perishable departments
Consistent execution of the Company’s merchandising and customer service standards by our store associates
Programs to reduce costs including inventory shrink expense, distribution costs and administrative expenses
Investment of a significant portion of these cost savings in increased promotions to drive further sales increases
Continued focus on upgrading the Company’s store base.
“The completion of the chain-wide rollout of our loyalty card program has been very successful,” said Mr. Fisher. “We have now issued more than two million Wild Cards to our customers. The Wild Card helps to increase sales and reward customer loyalty by enabling us to focus our promotions on our best customers.”
Penn Traffic began implementation of the Wild Card in its 69 Ohio and West Virginia stores in September 2000 and introduced it in its remaining 150 stores in September 2001. Penn Traffic invested $2.4 million in startup costs to complete the rollout of the loyalty card program in the third quarter, which was somewhat less than the $3 million the Company had expected to spend.
According to Mr. Fisher, investments in technology will continue to play a significant role in addressing consumer needs, reducing costs and improving the Company’s business processes. “We plan to replace the majority of our point-of-sale systems over the next two to three years, beginning with a pilot system that will be installed in our Manlius, New York, supermarket this January, as part of a major remodel of that store,” said Mr. Fisher. “We expect that the new POS system will improve customer service, increase labor productivity, enable us to implement a greater variety of merchandising programs and provide important customer purchase data.”
“We are continuing to invest in our core markets,” said Martin A. Fox, Penn Traffic’s Executive Vice President and Chief Financial Officer. During the second half of the current fiscal year, Penn Traffic will complete 17 store remodels, including three in Syracuse, two in Jamestown and one in Potsdam, New York; four in Johnstown, Pennsylvania; and seven in Columbus, Ohio. These projects are part of the Company’s $55 million capital program for the current fiscal year. “In total we will complete 29 remodels and open one replacement store this fiscal year. These 30 projects represent 16 percent of our total square footage,” said Mr. Fox.
“Including this year’s expenditures, since we established our current capital investment program two and one half years ago we have invested approximately $140 million to improve our infrastructure and grow our business. As part of this program we have remodeled, enlarged or replaced 80 supermarkets representing 43 percent of our total square footage,” said Mr. Fox.
“Now that we have made these capital expenditures, we will begin shifting the emphasis of our investments from enhancing existing supermarkets to building new or replacement stores,” said Mr. Fox. “We have recently begun construction of an incremental store in the Syracuse suburb of Fayetteville, New York and replacement stores in Corning, Rome and Pulaski, New York. We have a number of other new or replacement stores in the planning or development stage.”
Penn Traffic indicated that in the fourth quarter of Fiscal 2002 it expects to achieve positive same store sales and growth in Adjusted EBITDA over the prior year’s $29.5 million level. Adjustments utilized in the determination of Adjusted EBITDA include startup costs and operating losses associated with the commencement of operation of the New England stores in Fiscal 2001 and the presentation of the 14-week fourth quarter of Fiscal 2001 on a 13-week basis.
“Notwithstanding our strong sales performance in the fourth quarter of the prior year, we are confident that we will continue to achieve solid same store sales growth in the fourth quarter as a result of the sales momentum we have built going into this quarter, the continued implementation of our long-term strategies and the improvements we have made in the planning and execution of our Holiday merchandising programs,” said Mr. Fisher.