SALT LAKE CITY -- Smith's Food & Drug Centers here said earnings and same-store sales declined while total sales increased during the second quarter and first half ended July 1.
Net income fell 24% to $9 million for the 13-week quarter and 13% to $18.5 million for the half. However, while earnings per share fell 12% to 36 cents for the quarter, they rose 1% to 73 cents for the half as a result of the company's stock repurchase program.
Sales rose 3% for the quarter to $770.4 million and 1% for the half to $1.52 billion, while same-store sales dropped 4.4%% for both the quarter and the half.
The 145-store company attributed the weakness in same-store sales to "a significant number of competitive store openings in most marketing areas, in addition to aggressive price competition in recession-plagued southern California."
It said earnings were affected "by the weakness in same-store sales, putting pressure on expense ratios," as well as by costs associated with opening seven combination stores and two new warehouse stores during the half.
Mark A. Husson, vice president of J.P. Morgan Securities, New York, said the company's comparable-store sales in California "have turned slightly positive, although they are coming off a soft base." He also said Smith's does not expect the California stores to turn a profit until the end of 1996.
According to Husson, Smith's is seeking a partner to boost capacity at its grocery warehouse in Riverside, Calif. -- which observers told SN is operating at about 35% of capacity. Husson said capacity on the dairy side of the facility was boosted from 35% to 85% after Smith's became partners with a local dairy, which the company declined to name.
Husson also said Smith's indicated it has opened two more warehouse stores in Las Vegas, giving it a total of four warehouse stores there doing a combined volume of $1.5 million per week.
