Stater Drives Q3 Sales Gains at Expense of Margins

SAN BERNARDINO, Calif. — Stater Bros. Holdings here recorded its second consecutive quarter of increasing comparable-store sales after five negative quarters — a result of a conscious decision, the company said, to sacrifice margins to keep sales up and offer values to customers.

Comps rose 4.3% for the fiscal third quarter and 1.7% for the 39-week period.

Margins for the quarter were 26.76%, compared with 27.29% in the prior year's third quarter. For the 39 weeks, margins were up slightly, to 26.72%, compared with 26.58% for the same period a year ago.

Jack Brown, chairman and chief executive officer, said Stater's debt refinancing during the first part of the year “has been very helpful in allowing us to sacrifice margin in the short term to retain our valued customers in the long term.”

For the 13-week quarter, net income rose 18.3% to $7.1 million and sales rose 4.3% to $939 million; for the 39 weeks, net income fell 8.6% to $17.1 million, while sales rose 1.6% to $2.8 billion.

The company said customer counts in the quarter were up approximately 1.4 million, resulting in a sales increase of about 1%.

“Our sales and customer-count increases indicate our valued customers appreciate our strategy of sharing their pain by holding prices as low as we can to help them through these tough economic times,” Brown said.

In response to a question, he said Stater is negotiating on its own with the United Food and Commercial Workers Union — separate from negotiations involving Albertsons, Ralphs and Vons — “and we believe all issues will be resolved without any interruption to customers.”

Q3 RESULTS