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PATHMARK CUTS SHRINK

CARTERET, N.J. -- Pathmark Stores here said it is seeing positive results from a shrink reduction initiative in general merchandise and plans to expand the program to all categories, Eileen Scott, chief executive officer, told financial analysts here.

"Our senior management team visited all our stores and talked about the initiative, and since the first quarter we've seen some positive results," Scott told analysts in a conference call following release of the chain's financial results for the second quarter ended Aug. 2. As previously reported, sales rose 0.8% to $995.6 million, same-store sales climbed 0.6% and net income jumped 77.1% to $6.2 million for the quarter.

Despite its shrink efforts, however, Pathmark experienced abnormal amounts of shrink in produce during the second quarter, Scott said. "During that period, close to 20% of the produce we sell is grown locally, but all the rain we had during the spring and summer wreaked havoc on the crops and hurt the quality, and consequently produce didn't hold up as well as we would have liked."

Scott said Pathmark also plans to implement a new merchandising system next year "that gives us the ability to understand purchasing patterns better so we can micro-merchandise individual stores moreso than we do today."

Frank Vitrano, president and chief operating officer, said 76 Pathmark stores were affected by the Aug. 14 blackout in the Northeast, with some stores losing power for almost 24 hours, "so there was some product spoilage and restocking costs, and sales were impacted."

Pathmark's insurance will reimburse it for the business interruption, including the profits on lost sales, product losses and related expenses, after the chain pays a $250,000 deductible, but its impact on third-quarter sales will be less than 40 basis points.