TURF FIGHT HITS PENN TRAFFIC BOTTOM LINE

COLUMBUS, Ohio (FNS) -- The successes of Big Bear Plus store openings here haven't been enough to overcome the turf battle Penn Traffic Co., the chain's Syracuse, N.Y.-based parent, is waging in upstate New York.Penn Traffic endured "a year of instability and uncertainty" in 1995, Chairman Gary Hirsch told shareholders at the company's annual meeting here last week."We know we haven't done well in

COLUMBUS, Ohio (FNS) -- The successes of Big Bear Plus store openings here haven't been enough to overcome the turf battle Penn Traffic Co., the chain's Syracuse, N.Y.-based parent, is waging in upstate New York.

Penn Traffic endured "a year of instability and uncertainty" in 1995, Chairman Gary Hirsch told shareholders at the company's annual meeting here last week.

"We know we haven't done well in the past year in terms of financial results," Hirsch said. Penn Traffic had a $79 million net loss in the year ended Feb. 3.

And this year's performance has been disappointing so far. For the 13-week first quarter ended May 4, sales slipped 3.8% to $827.7 million from $860 million a year ago, and same-store sales dipped 1%. The company also reported a $9 million net loss (83 cents a share) for the quarter vs. net earnings of $129,000 (1 cent a share) a year before. Cash flow in the quarter fell 21% to $44.6 million from $56.5 million in the prior-year quarter.

Sales trends continued to be weak in May and April, according to Penn Traffic officials. Also, nearly a year of disfavor from Wall Street has continued; the company's stock price has eroded from 35 5/8 last June to 11 1/2 June 4, the annual meeting date.

"The last 12 months have been challenging," Hirsch said, but the company has made adjustments that "clarify our position in the market for our customer."

Facing stiff competition in New York from such rivals as Wegmans, Price Chopper and Tops Markets, Penn Traffic has initiated a campaign to cut expenses, boost interdivisional efficiencies and bolster the appeal of its stores, such as through enhanced customer service and improved perishables departments.

"We've spent the last 12 months radically transforming and improving our organization," Hirsch said. One move included last year's closure of the 11 remaining Harts general merchandise stores to "return to a core business focus," he said. The closings resulted in a $65.2 million charge to earnings but, he noted, "we were pleased to get out of that distraction." Also under way is a cost-reduction program that aims to trim expenses by more than $10 million, or about 3%, by the end of the year. The company already has consolidated some functions. Penn Traffic also has scaled back its store expansion and remodeling plans. After spending $130 million on 11 replacement stores and various remodels last year, the company has budgeted $80 million this year. Plans call for two new stores, four replacements and 10 expansions. Penn Traffic has 266 stores.