SYRACUSE, N.Y. -- Penn Traffic Co. here said setbacks in its marketing program resulted in decreased sales for the fourth quarter and fiscal year ended Jan. 31.
The company launched a new strategy last June, which included lower prices, increased promotional activity, and an emphasis on cleaner stores and better customer service. However, changes in the company's meat program were not well-received by customers, causing sales to fall throughout stores, the company said.
The company said sales for the fourth quarter decreased 7.9% to $750.6 million, compared with $814.9 million a year ago. Sales for the 52-week fiscal year decreased 8.7% to $3.0 billion. Same-store sales decreased 7.3% in the fourth quarter and 8.2% for the year.
Bob Lupo, a high-yield analyst with BA Securities, Chicago, said the company's marketing program got off to a rough start, but Penn Traffic did manage to improve sales at the end of the fourth quarter and in the beginning of the first quarter of the current fiscal year. "They have conceded that the first leg of the strategy was a disappointment," Lupo said. "But they have nudged that strategy, and from January on, they have begun to turn things around."
Mike Kirkpatrick, a high-yield analyst with BNY Capital Markets, Roseland, N.J, said Penn Traffic indicated that the negative effect of the changes in its meat program masked any gains brought about by its promotional activity.
Kirkpatrick said Penn Traffic will have a difficult time achieving its stated goal of more profitable sales in the second half of the current fiscal year by way of decreased promotional activity -- because of the lack of loyalty among customers throughout the supermarket industry.
Penn Traffic said earnings before interest, taxes, depreciation and amortization for the fourth quarter were $42.5 million, compared with $51.3 million in the prior year, a decrease of 17.2%. EBITDA for the fiscal year were $165.3 million, compared with $175.6 million in the prior year, a decrease of 5.9%. Prior-year fourth-quarter results included a $1.2 million gain on the sale of a parcel of real estate.
The company reported a net loss of $12.9 million in the fourth quarter and a net loss of $61.1 million in the fiscal year. Phil Hawkins, Penn Traffic president, said: "Our sales and operating results for the fourth quarter were below our original expectations. We have taken the appropriate steps to address the internal execution issues."
4TH-QUARTER RESULTS
Qtr Ended 1/31/98 2/1/97
Sales $750.6 million $814.9 million
Change - 7.9%
Same-store - 7.3%
Net Income ($12.9 million) ($6.3 million)
Inc/Share ($1.19) (58 cents)
52 Weeks 1997 1996
Sales $3.01 billion $3.30 billion
Change - 8.7%
Same-store - 8.2%
Net Income ($61.1 million) ($41.4 million)
Inc/Share ($5.63) ($3.81)
Note: For the 52 weeks ended Jan. 31, the company recorded pretax charges totaling $12.6 million associated with a management reorganization and related corporate actions. In addition, the company recorded pretax charges of $5.6 million associated with the retention of recently hired corporate executives.
