SYRACUSE, N.Y. -- Penn Traffic Co. here said last week a pickup in same-store sales and the addition of 10 New England stores that had been leased to Grand Union for 10 years helped boost total revenues for the first quarter ended May 5.
However, losses in those stores contributed to an overall net loss for the 13-week quarter, the company said -- a loss that should disappear in the second half of the fiscal year, Joseph Fisher, president and chief executive officer, said.
"Toward the end of the quarter, we switched from the wholesaler that had been supplying those stores [C&S Wholesale Grocers, Brattleboro, Vt.] to supplying them from our Syracuse distribution center, and not only are we getting improvements in gross-profit net of transportation but we're also getting the advertising and merchandising flexibility we need.
"So, we're encouraged by the recent results, and the stores are on trend to be profitable contributors in the second half."
Fisher made his remarks in a conference call with securities analysts to review financial results for the quarter, which showed sales up 2.7% to $608.4 million and same-store sales up 0.4%, with a loss of $27.1 million.
The company said it had positive net income of $200,000 for the quarter, after excluding a noncash charge of $27.3 million for amortization of excess reorganization value related to its financial restructuring in 1999.
Earnings before interest, taxes, depreciation and amortization fell 2.7% to $21.4 million, compared with $22 million a year ago. However, excluding $2.9 million of income in the year-ago period associated with the lease of the 10 New England stores, the company said EBITDA was up 11.4%.
According to Martin Fox, executive vice president and chief financial officer, the increase in EBITDA resulted from better labor scheduling at the stores and distribution centers, reduced shrink expense in perishables and non-perishables, and improved warehouse and fleet utilization initiatives.
At store level, Penn Traffic completed the launch of a branded program in two additional perishables categories -- Bakery Fresh and Fresh 'N Ready deli -- to complement the Gold Label meat and Garden Fresh produce programs it introduced in the past two years. "While it's premature to share results in the two new categories, the first two departments continue to achieve sales growth in absolute dollars and percent to total store sales," Fisher said.
Fisher also said the company is improving its private-label sales penetration with "extensive in-store signing and aggressive sales events" that have nearly doubled the category's penetration from a year ago, which saw sales double over the previous year.
In response to a question, Fisher said he expects Penn Traffic to be able to deal with all competitive challenges, including the entry of Giant Eagle into Columbus, Ohio, with three existing stores and a fourth under construction, and the introduction by Kroger Co. of a loyalty card there seven months after Big Bear introduced its Wild Card loyalty program.
