Penn Traffic Reports Net Loss in Third Quarter
SYRACUSE, N.Y. - The Penn Traffic Company on Friday announced a net loss of $5.7 million or $0.28 per diluted share in the third quarter of fiscal 2003, due in part to decreased same-store sales and increases in health insurance, pension, utility and insurance costs. This year's results compared to a net loss of $27.0 million or $1.34 per diluted share in the prior year's third quarter. Results include $2.0 million (pretax) of costs incurred in connection with its previously announced financial restatement.
The adjusted net loss was $4.5 million or $0.22 per diluted share compared to adjusted net income of $1.9 million or $0.09 per diluted share in the prior year's third quarter.
EBITDA for the third quarter of fiscal 2003, which ended Nov. 2, was $10.8 million compared to $21.4 million in the prior year, while adjusted EBITDA was $12.8 million compared to $23.8 million in the prior year.
Revenues were $580.1 million, a decrease of approximately 3.1 percent from $598.6 million in the prior year. Same store sales for the third quarter decreased 2.4 percent from the comparable prior year period.
Third quarter results were adversely affected primarily by reduced same store sales, lower gross profit margins associated with increased promotional spending designed to maintain or improve sales in the current difficult environment, and increases in health insurance, pension, utility and insurance costs, the company said. In addition, certain fixed costs increased as a percentage of revenues.
"Reduced consumer confidence, deflation in key product categories, the increased penetration of the retail food industry by alternative channels of trade, and significant increases in employee benefit costs have created a very challenging environment for supermarket companies," said Joseph V. Fisher, Penn Traffic's president and CEO. "Like most supermarket companies, we have responded to these dynamics by investing additional amounts in pricing and promotional activity.
"After re-evaluating our pricing and spending on promotions across our markets, we have concluded that during the third quarter, we over-invested in a number of our markets. We have now taken steps to carefully moderate our promotional spending in those markets in which we believe we can maintain our share at a lower level of promotional activity, while maintaining an aggressive level in those markets where we believe it is necessary or appropriate," said Fisher.
"While we are clearly disappointed in the third quarter results, we also recognize that we have a solid business plan, good market positions, a modern store base and dedicated employees. We believe these factors will enable us to weather the current economic downturn and position the company to take advantage of a recovery," said Fisher. In the short term, the company plans to focus primarily on improving the profitability of its existing store base, Fisher said.
The company credits its loyalty program, including its new 'Kids Club' children's version of the loyalty card, as a key advantage. "We continue to utilize our loyalty card database to understand and respond to changing consumer behavior and target specific customer segments to increase loyalty," said Fisher.
Martin A. Fox, Penn Traffic's executive VP and CFO, added that the company has almost completed its fiscal 2003 capital investment program.
The Penn Traffic Company operates 215 supermarkets in Ohio, West Virginia, Pennsylvania, upstate New York, Vermont and New Hampshire under the "Big Bear," "Big Bear Plus," "Bi-Lo," "P&C" and "Quality" trade names. Penn Traffic also operates a wholesale food distribution business serving 82 licensed franchises and 66 independent operators.
The adjusted net loss was $4.5 million or $0.22 per diluted share compared to adjusted net income of $1.9 million or $0.09 per diluted share in the prior year's third quarter.
EBITDA for the third quarter of fiscal 2003, which ended Nov. 2, was $10.8 million compared to $21.4 million in the prior year, while adjusted EBITDA was $12.8 million compared to $23.8 million in the prior year.
Revenues were $580.1 million, a decrease of approximately 3.1 percent from $598.6 million in the prior year. Same store sales for the third quarter decreased 2.4 percent from the comparable prior year period.
Third quarter results were adversely affected primarily by reduced same store sales, lower gross profit margins associated with increased promotional spending designed to maintain or improve sales in the current difficult environment, and increases in health insurance, pension, utility and insurance costs, the company said. In addition, certain fixed costs increased as a percentage of revenues.
"Reduced consumer confidence, deflation in key product categories, the increased penetration of the retail food industry by alternative channels of trade, and significant increases in employee benefit costs have created a very challenging environment for supermarket companies," said Joseph V. Fisher, Penn Traffic's president and CEO. "Like most supermarket companies, we have responded to these dynamics by investing additional amounts in pricing and promotional activity.
"After re-evaluating our pricing and spending on promotions across our markets, we have concluded that during the third quarter, we over-invested in a number of our markets. We have now taken steps to carefully moderate our promotional spending in those markets in which we believe we can maintain our share at a lower level of promotional activity, while maintaining an aggressive level in those markets where we believe it is necessary or appropriate," said Fisher.
"While we are clearly disappointed in the third quarter results, we also recognize that we have a solid business plan, good market positions, a modern store base and dedicated employees. We believe these factors will enable us to weather the current economic downturn and position the company to take advantage of a recovery," said Fisher. In the short term, the company plans to focus primarily on improving the profitability of its existing store base, Fisher said.
The company credits its loyalty program, including its new 'Kids Club' children's version of the loyalty card, as a key advantage. "We continue to utilize our loyalty card database to understand and respond to changing consumer behavior and target specific customer segments to increase loyalty," said Fisher.
Martin A. Fox, Penn Traffic's executive VP and CFO, added that the company has almost completed its fiscal 2003 capital investment program.
The Penn Traffic Company operates 215 supermarkets in Ohio, West Virginia, Pennsylvania, upstate New York, Vermont and New Hampshire under the "Big Bear," "Big Bear Plus," "Bi-Lo," "P&C" and "Quality" trade names. Penn Traffic also operates a wholesale food distribution business serving 82 licensed franchises and 66 independent operators.