Stater Retains Sharp Price Strategy

SAN BERNARDINO, Calif. — Stater Bros. Markets [4] here said last week it may begin to see some earnings improvements later in its fiscal year as comparisons become easier, though it intends to maintain its low-margin strategy on pricing indefinitely.

For the first quarter that ended Jan. 30, net income fell 39.5% to $5.4 million, while the chain’s gross profit margin declined 115 basis points to 25.88% — compared with 27.03% a year ago — “due to increased competitive pressures and a conscious decision to keep prices low and not to pass through inflation,” Dave Harris, senior vice president, chief financial officer and chief accounting officer, told analysts during a conference call.

That strategy resulted in profit declines beginning in last year’s second quarter, and though comparisons will ease, “we anticipate margins will continue to be challenged for the foreseeable future,” he said.

Sales for the quarter rose 0.8% to $968.7 million and comparable store sales also increased 0.8%.

Jack Brown, chairman and chief executive officer, said the chain is committed to keeping prices low, “to the extent possible, to help our customers weather these tough economic times” — a strategy that helped the chain boost its customer count by approximately 254,000 during the quarter, he added.

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“Since the beginning of this economic crisis, we have maintained a policy of retaining and growing customer counts by providing value and superior service to our customers. We feel it is important to retain our customers so when the economy does finally turn around, they will still be shopping at their local Stater Bros. supermarket.”

Brown noted the unemployment rate in the chain’s San Bernardino-Riverside county marketing area is 10.9% — higher than the national average of 7.8% and higher that the California average of 9.8%.

He said the major chains all have stores available for sale — though, in response to a question, he declines to say whether most of those are operated by Albertsons — though Stater might be interested in only one or two locations.

He also talked about the “sheer terror” experienced by residents around Stater’s store in Big Bear, who were prevented from leaving the area during the hunt last week for Christopher Dorner. The store remained open, he said, and made free food, water and other drinks available to first responders.

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