CARTERET, N.J. -- Pathmark Stores here said last week it will focus in the next year on holding back increases in employee health and pension costs.
During a conference call with industry analysts to discuss results for the third quarter and 39 weeks ended Nov. 1, Eileen Scott, Pathmark's chief executive officer, said, "Welfare and pension cost increases are currently my biggest single expense concern."
Scott noted that the company made some progress on this issue in a contract agreement reached last month with United Food and Commercial Workers Local 342, Mineola, N.Y., which represents 1,100 Pathmark employees on Long Island and parts of New York City. The contract creates a second tier of health benefits for new hires, and replaces a defined-benefit pension plan with a fixed annuity plan, according to Scott.
Still, Frank Vitrano, Pathmark's president, chief financial officer and treasurer, said during the conference call that the company's cost-savings and profit-generating efforts in 2004 will be "largely offset by substantial increases in associate welfare and pension expenses." He estimated that the company's welfare and pension costs will increase 9% next year, and this increase will boost sales, general and administrative expenses by 0.3%.
Among the other issues discussed during the call were:
Full-year guidance for 2003 and 2004. Vitrano said the company expects same-store sales of 1% and earnings per share of between 52 and 57 cents for fiscal 2003.
Commenting on next year, he said, "Although there has been much fanfare about a recovering economy, we have not seen a change in consumer behavior in our market place." He estimated that next year, same-store sales will grow between 0.5% and 1.5%, and earnings per share will be between 53 and 60 cents.
Capital expenditures for 2003 and 2004. Vitrano said capex for 2003 will total $85 million, $10 million less than previously expected because a store opening originally scheduled for this year has been pushed back to 2004. Spending for technology will come to $15 million for 2003, according to Vitrano.
In 2004, he said the company expects to spend $95 million, with $15 million going to technology. The company plans to open two new stores, and complete 20 remodelings, he noted.
In the 13-week quarter, sales rose 0.7% to $978.5 million, and same-store sales grew 0.7%, but the company had a net loss of $0.2 million, or 1 cent per share, the same earnings performance as last year's third quarter.
Pathmark noted that these results include a previous $2.5 million (after taxes) charge related to the elimination of $102 million in debt. Excluding this item, Pathmark said it would have recorded net income of $2.3 million, or 7 cents per share.
In the 39-week period, sales increased 1.5% to $2.98 billion, same-store sales were up 1.1%, net income rose 27.8% to $6.9 million, and earnings per share were 23 cents, vs. 18 cents in last year's comparable period.
