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CARTERET, N.J. – In the wake of widening quarterly losses, Pathmark Stores Inc. said its board has retained an adviser to seek strategic alternatives, paramount among which could be a sale of the company.
"Our commitment to enhance shareholder value is our No. 1 priority and, while we are working hard to improve our performance, we are looking at a number of alternatives in our efforts to build value for our shareholders," said Pathmark c.e.o. Eileen Scott, of the chain’s decision to retain Dresdner Kleinwort Wasserstein. The financial firm will assist Pathmark in assessing its future direction.
Investors greeted the news by pushing up shares 1.6 percent to $5.68 in recent action; the company had traded as high as $6.98 earlier in the session.
For the three months ended Oct. 30, Pathmark reported a net loss of $3.6 million, or 12 cents a share, vs. last year's loss of $200,000, or 1 cent a share. Excluding charges, the third-quarter net loss would have been $2.8 million, or 10 cents a share.
Sales for the period increased marginally to $979.9 million from $978.5 million a year earlier, while same-store sales declined 0.5 percent.
Pathmark’s management said that despite being "disappointed" with its latest results, it has taken steps to improve business. The chain operates 142 stores in the New York-New Jersey area, and metro Philadelphia.
"We have adjusted our sales and advertising programs to be better aligned with our current sales expectations and have implemented expense control initiatives," Scott said. "We are on target to achieve the fiscal 2004 guidance we provided in late October," at which time the chain slashed its fiscal 2004 earnings forecast to a loss of 13 to 25 cents a share, down from it previous outlook ranging from breakeven to earnings of 20 cents a share.
Results for Pathmark’s third quarter also included a $1.5 million pre-tax interest charge, or $0.02 per diluted share, related to the early extinguishment of the company’s bank credit agreement dated September 19, 2000, in connection with the previously disclosed refinancing of the credit agreement on Oct. 1, 2004. Excluding this item, the net loss in the third quarter of fiscal 2004 would have been $2.8 million, or $0.10 per diluted share.
The results for the third quarter of fiscal 2003 included a $4.2 million pre-tax interest charge, or $0.08 per diluted share, related to the early extinguishment of $102 million of the company's term loan under the credit agreement. Excluding this item, net earnings in the third quarter of fiscal 2003 would have been $2.3 million, or $0.07 per diluted share.
Pathmark said Dresdner Kleinwort Wasserstein’s assessment could result in a decision to sell, although no such decision has been made and no definitive prospective buyers have been identified.
In other Pathmark news, the chain is under fire from neighborhood residents in Queens for a mailing that asks them to send a card to local lawmakers supporting a new store on 69th Ave. and 195th Lane, reported the Queens Chronicle.
The local newspaper ran an excerpt of the brochure, which read, "The proposed Pathmark will bring so much" to the Fresh Meadows section of the New York City borough, including employment opportunities, a pharmacy and free health clinic. Included in the brochure was a detachable card that read, "Yes! I support Pathmark coming to my community." It is addressed to the five elected officials who represent Fresh Meadows.
The paper said the mailer angered many residents who have opposed the plan since it first came to light in March. At the time, the chain proposed building a 55,000 sq.-ft. superstore with rooftop parking on the site of a local strip mall. Community groups banded together to oppose the development, which they said would snarl traffic in the residential area and disrupt students at a nearby school.
Rich Savner, a Pathmark spokesman, was quoted as saying the company is continues to re-evaluate the plan but has not released a revised version. He characterized the mailing was "an educational campaign" while noting that the company hopes to have a plan with a reduced store size before the end of the year.
"We are not hiding anything," Savner said. "We are talking. We are encouraged because there has been overwhelming support. We are absolutely encouraged." Pathmark has sponsored a poll asking local residents if they would support the opening of a new store.
Pathmark currently operates 142 supermarkets primarily in the New York - New Jersey and Philadelphia metropolitan areas.