COLTON, Calif. — Stater Bros. Holdings here said cannibalization by new stores hampered its comparable-store sales growth in 2006, and net income fell in part due to a decline in gross margins from higher costs and competitive pressures.
For its fiscal fourth quarter, which ended Sept. 24, Stater Bros. said net income declined about 11%, to $10.8 million, on a sales gain of 4.9%, to $891.4 million, compared with year-ago results. For the full fiscal year, net income was down slightly, to $26.1 million, vs. $26.2 million in fiscal 2005. Sales for the full year were up 4%, to $3.5 billion. Comparable-store sales were up 2.9% for the fourth quarter and 1.5% for the year.
Bryan Hunt, a debt analyst at Wachovia Capital Markets, Charlotte, N.C., said in a report that cannibalization by new stores impacted comparable-store sales by $13 million in the quarter. Without cannibalization from new stores, comps for the year would have increased 4.5%, the company said.
Hunt said the company's focus on its new headquarters, scheduled to open in September, and distribution center, scheduled to open in July 2008, could be a distraction and contribute to what he predicted could be “uninspiring results” for the next two years.
He also projected increased competitive pressures from Wal-Mart and possibly Tesco, which plans to begin opening stores in Southern California later this year.
Stater Bros. plans to spend $261 million on capital expenditures in fiscal 2007, including $189 million for the new DC and headquarters.
