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Stater Expects to Invest Margin to Gain Sales

SAN BERNARDINO, Calif. — Stater Bros. Markets here contemplates investing “a small amount of gross margin” in the second half of its fiscal year, Jack Brown, chairman and chief executive officer, said Wednesday in a call with bondholders.

Gross margin during the second quarter ended March 25 was 27.8% of sales, compared with 26.8% a year ago, when the chain was promoting its 75-year anniversary; and 27.4% for the first half, compared with 26.7% a year ago, “so we have a little room to reach out for more volume during the second half,” Brown said.

Related story: Stater Customer Counts Rising

Net income for the quarter rose 75.8% to $16.4 million while sales jumped 2.7% to $937.7 million and like-store sales rose 2.7%.  For the half, net income increased 108.7% to $25.4 million, while sales were up 4.7% to $1.9 billion and like-store sales rose 4.7%.  The company said it reduced interest expense by $9.9 million during the half, primarily by paying down approximately $125 million of debt and refinancing most of its remaining outstanding debt at a lower interest rate during the first quarter.

The refinancing “has made it possible for us to use these savings to help ease our customers’ financial burden by keeping our prices low, even as inflation has increased the cost of many of the items we sell,” Brown said.

Brown also announced that Phil Smith, executive vice president, finance; chief financial officer; and chief administrative officer, plans to retire June 14, though he will remain with Stater’s holding company. Succeeding Smith as CFO will be Dave Harris, the chain’s vice president, finance.

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