Rapid gasoline deflation and slow grocery inflation led to flat quarterly sales and comps and a $5.2 million loss, parent company Tops Holding II said.
For the fiscal third quarter ended Oct. 3, net sales decreased 3.4% to $560.7 million, Tops said, primarily due to a 30.3% decline in the average retail price per gallon of gasoline, along with the effect of lost sales due to 27 in-store pharmacies that closed earlier this year. Excluding gas, “inside sales” of $522.5 million were down 0.7%, and comparable-store sales, excluding fuel and pharmacy, were flat.
The Williamsville, N.Y.-based chain posted a $5.2 million loss in the quarter vs. a $1.4 million loss in the third quarter last year, reflecting the sales decline and 2% increase in operating expenses related to an increase in the New York state minimum wage and higher performance-based bonus expense.
Gross profits were up by 0.2% from the same period last year, and by 110 basis points as a percent of sales to 29.5%. The improved margins reflected high profits on fuel sales, and a favorable sales mix change related to lower gas revenue.
“Our inside sales and same store sales were flat for the quarter as top line growth for Tops and the supermarket industry in general is being constrained by historically low inflation which limits normal price-driven revenue growth,” Frank Curci, Tops chairman and CEO, said in a statement. “Despite this challenge, we are maintaining market share in our market area and continue to generate significant cash. When combined with excellent liquidity and the increased financial flexibility provided by our recent debt refinancing, we are positioned very well to continue investing in our stores and growing our business.
“Our strategy of making fill-in acquisitions of independents and opening new stores in underserved markets, primarily contiguous to major urban markets where we operate, is delivering strong results with the four new stores opened in the last year performing at expectations. We have a good pipeline of stores that fit our profile for fill-in acquisitions and expect this strategy will be a strong driver of incremental future growth.”
Tops operates 161 supermarkets, with an additional five stores operated by franchisees.
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