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    Losses Widening, Penn Traffic Blames Economy

    The grocer also reported a same stores sales decline for the first quarter.

    The Penn Traffic Co. this week posted revenues of $287.1 million in the 13 weeks of fiscal 2009 ended May 3, 2008, vs. $298.0 million in the year-ago period, when the company owned 106 locations. Same-store sales for the quarter declined 1.4 percent.

    The grocer's net loss was $12.4 million, or $1.47 per share, in the first quarter, compared with $7.4 million, or 87 cents per share, last year, reflecting lower sales volume.

    In what could be an attempt to stop the bleeding, the chain's president and c.e.o. Gregory J. Young said it would be "increasing our offering of value-priced staples and expanding the availability of our summer rewards program to most of our corporate-owned stores."

    Said Young, "We see the grocery industry being significantly impacted by continued gas-price increases and consumers' general concerns about the economy, with customers consolidating their shopping trips and looking for value. We know gas prices are forcing some of our shoppers to stretch their budgets."

    First-quarter results were also affected by a noncash $2.6 million charge to adjust the carrying value of the assets of six stores that were sold or closed to fair value, and $4.7 million for other nonrecurring items. First quarter 2008 results included nonrecurring charges of $4.5 million.

    Continued cost control measures and growing private label and signature product sales helped offset the margin impact of lower volume and diesel fuel-related transportation cost increases, according to Penn Traffic. Gross profit was $75.0 million, or 26.1 percent of revenues, in the first quarter of fiscal 2009, vs. $79.3 million, or 26.6 percent of revenues in the year-ago period.

    The grocer incurred selling and administrative expenses of $81.3 million, or 28.3 percent of revenues, in the first quarter, as opposed to $81.7 million, or 27.4 percent, last year. First-quarter operating loss from continuing operations was $12.4 million, vs. $6.9 million during the same period last year.

    "Executing Penn Traffic's strategic plan, which we outlined for investors earlier this year, is even more important in the current operating environment," noted Young. "We'll continue to focus investments on our top-performing and highest potential locations, lowering corporate administrative expenses and not-for-resale costs, and optimizing our wholesale business."

    Revenues from continuing operations for Penn Traffic's 97-store retail food segment, which accounts for about 80 percent of company sales, were $231.4 million for the quarter, vs. $245.2 million last year. Same-store sales from continuing operations dropped 1.4 percent in quarter, compared with a 0.4 percent rise in the year-ago period. Gross profit from continuing retail operations was $70.8 million, or 30.6 percent of revenues during first quarter of fiscal 2009, vs. $75.0 million, or 30.6 percent of revenues last year. Operating profit from continuing retail operations was $4.7 million for the first quarter of fiscal 2009 and $7.9 million in the year-ago period.

    Wholesale food distribution segment revenues were $53.5 million in the first quarter, compared with $50.5 million the same period the year prior. Segment gross profit was $3.0 million, or 5.7 percent of segment revenues, during the quarter, vs. $3.3 million, or 6.6 percent of revenues, during the year-ago period. Wholesale operating profit from continuing operations was $1.6 million in quarter, vs. $1.6 million in the first quarter of fiscal 2008.

    During a conference call yesterday, Young said that the company had reached a tentative agreement on three-year collective bargaining agreements with workers represented by Utica, N.Y.-based UFCW Local 1. The agreements will be voted on in the next few days, he added.

    Although its recent bankruptcies are behind it, Penn Traffic has continued to struggle in a highly competitive market. Earlier this year it closed its Penny Curtis commercial bakery division and laid off 160 workers.

    Syracuse, N.Y.-based Penn Traffic operates or supplies over 220 supermarkets in upstate New York, Pennsylvania, Vermont, and New Hampshire. The chain's retail food business includes corporate-owned stores with the P&C, Quality and BiLo banners, and its wholesale food distribution business supplies independently operated supermarkets and other wholesale accounts.

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