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Harris Teeter Profits Pressured

MATTHEWS, N.C. — Harris Teeter Supermarkets here said pricing and promotional efforts drove gains in sales and market share in the fiscal first quarter, although it said profits were under pressure from competition, low inflation and a weak retail environment during the holidays.

Some analysts lowered their outlooks for the company after a shortfall in first-quarter net income.

Andrew Wolf, a Richmond, Va.-based analyst with BB&T Capital Markets, noted that Harris Teeter’s earnings per share of 46 cents were well below his estimate of 55 cents and below analysts’ consensus of 59 cents.

“Most troubling in our view, aggressive pricing by Food Lion in the Carolinas and northern Virginia appears to have impacted Harris Teeter’s pricing structure by more than we would have anticipated,” Wolf said in a research note. He lowered his estimate for the company’s earnings for the full year.

Read more: Harris Teeter Posts Q4 Gains

Net income for the quarter totaled $22.8 million, vs. $13.7 million in the first quarter of a year ago; year-ago net income from continuing operations totaled $25.8 million. Operating profit for the first quarter of fiscal 2013 was $40.5 million, or 3.48% of sales, vs. $46.3 million, or 4.13% of sales, for the first quarter of fiscal 2012. The company attributed the decrease to the operations and start-up costs of 10 stores acquired from Lowes Foods and six stores sold to Lowes Foods last year.

Sales for the first quarter, which ended Jan. 1, rose 3.7%, to $1.16 billion, including comparable-store sales gains of 2.53%.

During the first quarter of fiscal 2013, Harris Teeter opened three new stores, two of which were acquired from Lowes and reopened under the “201central” banner. Since the end of the first quarter of fiscal 2012, Harris Teeter has had a net addition of five stores.

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