SALT LAKE CITY -- Smith's Food & Drug Centers here reported increased overall sales but lower same-store sales for the third quarter ended Oct. 1.
ose 68% to $13.3 million.
Last year's third-quarter income was reduced by a tax-rate adjustment of $2.6 million, or 9 cents per share. After adjusting for the change, net income for the quarter was up 27%.
Robert D. Bolinder, Smith's executive vice president, said the earnings improvement for the third quarter can be attributed to increased sales, higher gross margins and lower operating expenses.
"However, these benefits were partially offset by higher depreciation and interest charges, and the new California operation is still affected negatively by the recession and intense competition," he said.
Smith's slowed its expansion in California during the quarter "to give operating management an opportunity to fine-tune and improve the operation of the 31 [California] stores," Bolinder said.
Instead, the chain plans to open 10 to 12 new stores in other states in 1995 and 1996, with the emphasis in Arizona, New Mexico, Nevada and Utah.
Jonathan Ziegler, a securities analyst with Salomon Bros., New York, said Smith's may continue to open one or two stores a year in California while concentrating on expansion elsewhere.
"Smith's feels it expanded too rapidly in California, with management focusing too much on openings rather than operations," he said. Wall Street was impressed with the chain's third quarter, Ziegler said, because Smith's demonstrated its ability to lower operating-expense ratios.