MATTHEWS, N.C. — Harris Teeter here said it plans to boost capital spending in fiscal 2009 by nearly 30% — to $245 million from $190 million this year.
The company said it expects to open 19 new stores next year, including continued expansion in the Washington, D.C., area.
The chain has opened 19 new stores through the first three quarters of this year and closed four. A spokeswoman declined to indicate to SN how many more stores it may open or close through the balance of the year.
Harris Teeter is a wholly owned subsidiary of Ruddick Corp., Charlotte, N.C. For the third quarter and 39 weeks that ended June 29, Ruddick said sales and profits increased for the 174-store chain.
Operating income rose 11.7% to $44.5 million for the quarter and 19% to $135.1 million for the 39-week period, while sales jumped 10.8% to $926.3 million for the quarter and 11.4% to $2.7 billion for the year to date.
Comparable-store sales rose 1.7% for the quarter and 3.1% for the 39 weeks. The company said comps for the quarter were negatively impacted by the timing of the Easter and July 4th holidays, which were both included in last year's third quarter. Easter fell in this year's second quarter and July 4th in this year's fourth quarter.
“We have continued to adjust and refine our merchandising activities in response to the current economic environment, and see positive responses from our customers,” said Thomas W. Dickson, chairman, president and chief executive officer of Ruddick, in a prepared statement.
Karen Short, an analyst with Friedman, Billings, Ramsey & Co., New York, said she believes Harris Teeter is well positioned going forward, despite the declining economy. “[The company] continues to see positive basket and traffic trends, and the company is well positioned to maintain, or even gain, share,” she said.
Besides the shift in the two holidays, sales were negatively impacted by higher private-label penetration, Short said. “We expect further increases in sales of private label and generic products, which enhance gross margins but have a dampening effect on the top line,” she added.
Andrew Wolf, an analyst with BB&T Capital Markets, Richmond, Va., said gross margins contracted 19 basis points to 31.14% from 31.33% during the quarter “due to increased promotions geared to increasingly value-focused customers.”
He said Harris Teeter has “a solid growth outlook,” adding that it is “executing at a high level, and its ambitious growth foray into greater Washington, D.C., [is] doing well.”
Harris Teeter accounts for more than 90% of Ruddick's sales; the balance comes from its textile division.