Penn Traffic Trims Q1 Losses

Penn Traffic Co. said aggressive cost-saving measures helped reduce its loss for the fiscal first quarter to $9.3 million, compared with $12.4 million a year ago. The company said the loss included $2.4 million in non-recurring charges related to professional fees, closed-store costs, legal costs related to the Securities and Exchange Commission investigation, severance pay, asset

SYRACUSE, N.Y. — Penn Traffic Co. here said “aggressive cost-saving measures” helped reduce its loss for the fiscal first quarter to $9.3 million, compared with $12.4 million a year ago.

The company said the loss included $2.4 million in non-recurring charges related to professional fees, closed-store costs, legal costs related to the Securities and Exchange Commission investigation, severance pay, asset sales and Chapter 11 reorganization costs. Non-recurring charges in the year-ago first quarter totaled $3 million.

Tod A. Nestor, chief financial officer, told investors those charges will come down “significantly” after the current fiscal year.

Sales for the quarter, which ended May 2, fell 5.7% to $200.1 million with five fewer stores, and same-store sales dropped 4.8%. The company said it attributes the sales declines to “lower volume and traffic trends resulting from competitors' new-store and remodel activity, as well as macroeconomic conditions.”

“The lower volume and traffic levels in the quarter were in line with our internal expectations and offset in part by our aggressive cost-saving measures, allowing us to continue narrowing Penn Traffic's losses,” said Gregory J. Young, president and chief executive officer. “At the same time, we continued to invest cash in store renovations and other strategic capital projects while paying down additional debt.”

In a conference call with analysts last week, Young listed some of the cost-saving initiatives imposed in the fourth quarter that he said should cut more than $2 million in overhead costs on an annualized basis, including more competitive bidding on utilities, grocery and garbage bags, and printing of promotional materials; more competitive bidding on contracts for janitors and snow-removal services; and programs to reduce waste in the fresh departments.

The switch from self-distribution to contracting with C&S Wholesale Grocers, Keene, N.H., last December has enabled Penn Traffic to be more aggressive on everyday and promotional prices on key staple items, Young said — resulting in the chain's ability to maintain relatively stable gross margin rates “in large measure because of the offset from the success of our C&S procurement partnership.”

Gross margin for the quarter was 31.1%, vs. 31.2% a year ago and 30.04% in the fourth quarter, Nestor noted.

Q1
RESULTS
Qtr Ended 5/2/09 5/3/08
Sales $200.1M $212.1M
Change -5.7%
Comp-store -4.8%
Net Income ($9.3M) ($12.4M)
Inc./Share ($1.10) ($1.46)