MOBILE, Ala. -- Delchamps here said sales rose 9.7% in the second quarter ended Jan. 1, but earnings declined as a result of the chain's promotional markdown activity.
alf, Delchamps said sales increased 7% and same-store sales rose 2.6%. Net earnings totaled $2.5 million in the quarter, a decline of 30% compared with net of $3.5 million in the same period last year.
Earnings for 26 weeks rose 1% to $6.6 million. This included a first-quarter credit of $900,000 related to the cumulative effect of a change in accounting for income taxes.
Excluding the accounting change, net earnings would have declined 12.8% in the first half, Delchamps said.
Randy Delchamps, chairman, president and chief executive officer, said the company was pleased by gains in both sales and market share during the quarter and first half.
"While promotional activity has contributed to this sales and market-share growth, promotional markdowns are clearly reflected in earnings for the quarter," he said. "We are committed to keep our business competitive while taking the necessary steps to improve the margins of the company and keeping our focus on expense levels."
Management is focused on resuming earnings growth while protecting the positive sales and increased market share and will continue to "aggressively respond" to competitive activity, Delchamps said.
Reflecting the retailer's increased promotional activity, gross margins declined 156 basis points in the second quarter to 24.54% of sales. Selling, general and administrative expenses also declined from 23.3% of sales to 22.8% of sales. Operating income fell 31% in the quarter to $4.8 million, or about 1.8% of sales. This compared with operating income of $7 million, or 2.8% of sales, in last year's second quarter.
Delchamps operates 119 supermarkets in Alabama, Florida, Mississippi and Louisiana and 11 liquor stores in Florida. The retailer opened one liquor store and expanded one supermarket in the second quarter.