SALT LAKE CITY -- American Stores here last week reported a 15.6% increase in net income in the first quarter ended April 30. Sales, however, declined 1.3% in the 13-week period.
Earnings totaled $48 million in the quarter, or 34 cents per share, compared with $41.5 million, or 29 cents per share, in last year's first quarter.
Earnings in the current quarter were reduced by 5 cents per share for charges related to the closing of a data center and a voluntary severance program at Acme Markets, an American division in Malvern, Pa.
Operating income rose 11.6% to $131.8 million, or 2.9% of sales.
Sales at American, the nation's second-largest chain, slipped to $4.6 billion. Same-store sales decreased 1.43% in the quarter, which included a 3.16% drop at Eastern food stores. Same-store sales at American's drugstore division increased 3.26% and Western food stores reported a 2.37% decline in same-store sales.
American's Western food division includes Lucky Stores in northern and southern California. Eastern food stores include Jewel Food Stores, Melrose Park, Ill., and Acme Markets.
Victor L. Lund, president and chief executive officer, said the first-quarter results marked "an outstanding start" for the year. The company successfully overcame severe weather in the East early in the quarter, low levels of food inflation and competitive food-store openings that slowed the pace of same-store sales, he said.
Mark Husson, a securities analyst at J.P. Morgan, New York, said American's cost-cutting effort is commendable. If the charges related to Acme's severance program and the data center closing are excluded, operating profits would have increased more than 20%, he said. Sales, however, were sluggish despite "slightly easier comparisons" with the year-ago period, he said. "American is being hit in certain markets by competitive store openings," he said.
Debra Levin, a securities analyst at Morgan Stanley, New York, said American's first-quarter results were "excellent." Gross margins increased 71 basis points to 26.69% of sales on a first-in, first-out basis, which was much better than expected.
