PENN TRAFFIC TO EXPAND LOYALTY CARD PROGRAM

SYRACUSE, N.Y. -- Penn Traffic Co. here said last week it expects to expand its Wild Card program to three other divisions based on the success of the loyalty card introduction at Big Bear stores earlier this year.Joseph V. Fisher, president and chief executive officer, said 70% of sales at Big Bear are done by customers using the card, "and the number continues to improve."Penn Traffic launched the

SYRACUSE, N.Y. -- Penn Traffic Co. here said last week it expects to expand its Wild Card program to three other divisions based on the success of the loyalty card introduction at Big Bear stores earlier this year.

Joseph V. Fisher, president and chief executive officer, said 70% of sales at Big Bear are done by customers using the card, "and the number continues to improve."

Penn Traffic launched the Wild Card program in September at its 70-store Big Bear division in Ohio and West Virginia.

Fisher said the company anticipates expanding the program in 2001 to its P&C division in upstate New York, Vermont and New Hampshire; its Quality Markets division in northwest New York state; and its Bi-Lo division in Pennsylvania. "However, we have not yet decided whether to introduce it in all three divisions at the same time or to do it in separate waves," Fisher said.

The rollouts are expected to cost less than the $1.5 million it cost Penn Traffic to introduce the cards at Big Bear, he added, "because some costs for internal systems were absorbed in the third quarter and won't have to be duplicated, although costs for promotions, advertising and producing the cards will have to be spent in each division."

Fisher made his remarks during a conference call with securities analysts to discuss Penn Traffic's financial results for the third quarter and 39 weeks ended Oct. 28, which showed sales up 0.1% to $611.3 million for the 13-week quarter and dropping 1.3% to $1.8 million for the 39-week period, while same-store sales dropped 0.1% for the quarter and rose 0.5% for the year to date.

The company reported losses for both periods, while earnings before interest, taxes, depreciation and amortization fell 22.6% to $19.5 million for the quarter and rose 6.4% to $69.8 million for the 39 weeks.

Martin A. Fox, executive vice president and chief financial officer, said same-store sales rose 0.9% during the first half of the year and were positive in August but fell off in September "when sales softened because of a slowdown in consumer spending" and then rebounded in October.

"That positive momentum has continued into the fourth quarter, and we believe same-store sales will be positive for the quarter and the year," Fox said.

He said the drop in EBITDA during the quarter reflected the $1.5 million spent to launch the loyalty card program, plus $700,000 for the startup of nine supermarkets in Vermont and New Hampshire that Penn Traffic had leased to Grand Union Co., Wayne, N.J., for 10 years. Grand Union returned those stores to Penn Traffic in late July; it had returned a 10th store to Penn Traffic last March.

EBITDA also reflected the loss of $3.1 million in income from the lease agreement with Grand Union, Fox pointed out, plus increases in promotional spending to drive sales and remodel stores.

"If you exclude the startup costs for the loyalty card and the New England stores, third-quarter EBITDA would have been about even with the prior year," Fox said.

Fisher said the 10 New England stores have been converted to the P&C banner and should be profitable by the end of the fiscal year. "The costs of integrating those stores were higher than anticipated because of the way Grand Union operated them," he said, "but they will be profitable this quarter because they are all good, solid locations."

According to Fox, Penn Traffic will spend $65 million in capital this year to open two replacement stores and complete 17 major remodels and several minor remodels; the company will allocate $60 million next year to open two replacement stores and complete 25 major remodels and to start construction on three new stores and three replacement stores that will open in calendar 2002, he added.