Improved Margins Cut Pathmark Loss

CARTERET, N.J. — Pathmark Stores here turned higher gross profits from flat comparable-store sales, reducing losses during its fiscal third quarter to $5.8 million, the company said last week.

Pathmark lost $18.3 million in the same period a year ago. EBITDA improved to $30.3 million from $19 million, due to higher gross profits in almost all departments, particularly in produce, which outperformed storewide comps by 4%, and illustrated benefits of a remerchandising program launched there a year ago, John Standley, chief executive officer, told analysts in a conference call.

Lower logistics costs and lower shrink expense also contributed to improvements in EBITDA, Standley added.

Although soft sales over the Labor Day weekend contributed to the flat comparable-store sales in the quarter, which ended Oct. 28, trends were better over Thanksgiving, Standley said, suggesting that comps could turn positive for the fourth quarter. Quarterly sales of $978.1 million decreased 0.3% from a year ago.

Ken Martindale, co-president and chief merchandising officer, said Pathmark would launch merchandising initiatives in other departments with an eye toward replicating the success the chain experienced in produce. “Specifically, we will roll out an enhanced seafood associate development program and we will continue to add new exciting items throughout the deli and meal solutions area,” Martindale said.

Store renovations in the new year will feature elements of Pathmark's new store prototype, while a newly built store featuring the design is scheduled to open late next year.

Martindale said Pathmark hasn't experienced any “dramatic impact” as a result of competitor Stop & Shop introducing everyday-low-price strategies.

Pathmark expects to begin stocking private-label items under Topco's Value Time and Top Care brands early next year, following the company's recent joining of the private-label buying cooperative.

Wild Oats-brand products are also en route to Pathmark stores. The items will bring the chain expertise in the natural/organic field that would be difficult to develop otherwise, with higher margins than typical private label, Martindale said.

3RD-QUARTER RESULTS