SAN BERNARDINO, Calif. — Stater Bros. Markets here said Wednesday net income rose in the third quarter but was down for the year-to-date period as the company continued to sacrifice gross margins to maintain its low-price position.
Net income for the 13-week quarter, which ended June 30, rose 36.8% to $10 million, while sales grew 2% to $968.8 million and same-store sales increased 3.2%. Excluding the impact of the Easter holiday, which fell in last year’s third quarter and this year’s second quarter, the company said sales for the quarter were up 3.2%.
For the 39-week year-to-date period, net income was down 17.5% to $27 million, while sales rose 1.8% to $2.9 billion and same-store sales also climbed 1.8%.
Gross profit margin was up 15 basis points to 26.6% of sales for the quarter but declined 63 basis points to 26.46% for the 39-week period “because of a conscious desire to keep costs low to retain and grow customer count,” Dave Harris, senior vice president, chief financial officer and chief administrative officer, told analysts during a conference call.
“Sacrificing margin is helping us build customer counts,” he added, with counts up by 834,000 customers during the first 39 weeks of the fiscal year.
According to Jack Brown, chairman and chief executive officer, “Customer counts are the lifeblood of supermarkets. During my years in the Navy, they told us, ‘When there is no wind, row,’ and we’re rowing as hard as we can so that when economic conditions improve, our sales will improve. When customers have more, we will get more.”
He said Stater has been able to keep costs down by reducing shrink at the back door and the checkstands, “and that’s been a major factor. But raising prices is not a consideration.”
Read more: Stater Says Minor Remodels Effective
Asked about the potential competitive impact of Aldi, which is building a distribution center in nearby Riverside County prior to entering the Southern California market, Brown said, “As Fresh & Easy found out, coming into this market is not fresh and it’s not easy. It made major commitments in the market and never opened a lot of those stores.
“Now Aldi is trying to take advantage of that situation. But with Aldi and dollar stores centering the market, they’ve created their own market niche, and like Hispanic stores did several years ago, those stores will become their own competitors.
“Everybody takes a little bit from you, but we remain committed to low pricing and full service, and although we’ve reduced labor costs slightly, we don’t want customers to feel we’re cutting back.”
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