LANDOVER, Md. -- Giant Food here said last week net income increased 16.8% to $95.2 million in the fiscal year ended Feb. 26.
Excluding a $3.9 million credit for the cumulative effect of an accounting change, year-end net totaled $91.3 million, an increase of 12% from the prior fiscal year.
Sales rose 2.7% to $3.57 billion last year and same-store sales increased 1.4%
Fourth-quarter results, however, were termed disappointing by some Wall Street securities analysts. Giant's shares dropped about $2.75 in the two days after it released last year's results, closing at $22.50 last Thursday.
In the 16-week fourth quarter, Giant said, sales increased 4.2% to $1.16 billion. Net income fell slightly to $36.3 million in the quarter.
Giant said a series of winter storms in its operating area contributed to the fourth-quarter sales increase. Selling, general and administrative expenses also fell slightly in the quarter.
Gross-profit margins, however, declined in the quarter, which resulted in the lower earnings, Giant said.
Ed Comeau, a securities analysts at Lehman Bros., New York, said Giant's gross margins dropped 35 basis points in the quarter. More aggressive pricing on Super Deals, Giant's large-pack program, contributed to the gross-margin decline.
Another possibility is that Giant reduced its overall gross margins in an attempt to produce a 5% sales increase in the quarter, Comeau said. "Giant really had all the groundwork there for a positive earnings surprise," Comeau said. "Sales were good, the regional economy was showing some signs of improvement and there were no major changes in the competitive environment. There was no reason to expect a decline in the gross margin in the quarter."