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NEW YORK - Shares of Pathmark Stores Inc. slumped after an analyst at C.L. King & Associates cut his earnings estimates for the grocer and downgraded the stock from a "buy" to a "neutral" rating, according to a Dow Jones report.
In a report issued Tuesday, analyst Gary Giblen noted that bad weather dampened food sales for family barbecues. He added that shrinkage at the chain is on the increase.
While he noted that these conditions affect the entire supermarket industry, Giblen held that Pathmark has been particularly vulnerable because its stores are located in low-income areas and are in New York and New Jersey, two states hit by rain over the Labor Day weekend.
In addition, Giblen said competitor ShopRite just launched a promotion offering discounts of between 10 percent to 30 percent, depending on the volumes purchased in September. He noted that ShopRite's promotion in the spring hurt Pathmark, and the new promotion should have a similar effect.
A new owner could be in Pathmark's future. Giblen rated the chain as "the preeminent buyout candidate in Supermarketland." That's the only thing that kept the analyst from lowering Pathmark's rating to "sell."
Giblen slashed his 2002 Pathmark earnings estimates to 60 cents a share from 78 cents and cut his fiscal 2003 forecast to 80 cents a share from $1.10 a share.
Pathmark is expected to report second-quarter earnings Thursday.