WILLIAMSVILLE, N.Y. — Tops Holding Corp., parent of the Tops Friendly Markets chain here, said the successful conversion of 51 acquired Penn Traffic stores and ongoing merchandising and execution effectiveness at its legacy stores helped the company drive sales and profit gains in the fiscal third quarter.
Last week the company reported net income of $6.4 million for the 12-week period, which ended Oct. 8, reversing a loss of $7.6 million in the year-ago third quarter.
Same-store sales at the chain were up 1.9%, excluding gas. Total sales were up 3.6%, to $538.6 million.
“We had a strong merchandising plan, with attention to costs,” said Frank Curci, Tops' president and chief executive officer, in a conference call with investors. “Having the costs of rebranding and the integration of the Penn Traffic acquisition behind us, we drove strong profitability improvements in those stores as well.”
The company also opened two new stores year-to-date, and is “pleased with their performance,” Curci added, noting the company expects to continue to add about two stores per year and is also on the lookout for acquisitions within its marketing area in upstate New York and northern Pennsylvania.
“Our business continues to improve, and customers are responding to our various merchandising initiatives, as well as our store remodel program,” Curci noted.
Operating income for the quarter was $20.7 million, or 3.9% of net sales, vs. $6.4 million, or 1.2% of net sales, in the prior-year period.
For the 40-week period, net income totaled $4.65 million, vs. a loss of $13.2 million in the 2010 year-to-date period. Sales were $1.82 billion, up 5.1%, and same-store sales rose 1.6%.
“Consumer buying habits have clearly changed since the recession,” Curci said. “The increased trend of customers trading down to lower-priced merchandise, including private label products, continues.”
He said consumers have been “responding well” to Tops' special savings promotions such as bulk sales and grouped-items deals.
Following the release of third-quarter results, Moody's Investors Service said it upgraded the debt of Tops Holding Corp.
“The business and execution risk associated with the Penn Traffic acquisition has been meaningfully reduced, and the integration has demonstrated positive results”, said Mickey Chadha, senior analyst at New York-based Moody's.
Moody's said it assigned a rating of B3, up from Caa1, to Tops' corporate family and probability of default, and also upgraded the rating to B3 from Caa1 on Tops' $350 million in secured notes.
