SALT LAKE CITY -- Smith's Food & Drug Centers here said competitive store openings in most of its markets and aggressive price competition in recession-plagued southern California contributed to decreases in earnings and same-store sales for the third quarter and 39 weeks ended Sept. 30.
For the quarter, net income fell 17.1% to $11.1 million. For nine months, net income slipped 14.5% to $29.6 million.
Same-store sales fell 1.8% for the quarter and 3.6% for the year-to-date.
Overall, third-quarter sales increased 5.9% to $768.3 million, while year-to-date sales rose 2.6% to $2.29 billion.
The 148-store company said earnings were affected by the weakness in same-store sales, which put pressure on expense ratios. Smith's also said that nine combination food and drug stores and four retail warehouse stores, opened during the nine-month period, increased operating, selling and administrative expenses. Smith's said it will open six more combination centers this year in Arizona, California, Nevada, New Mexico and Utah.
The company also said it anticipates continued weak earnings through the balance of the year as it "continue[s] its efforts to improve sales with decisions that will benefit Smith's competitive position in the longer term."
Those decisions could include whether to pull out of the southern California market altogether -- as numerous observers have speculated Smith's plans to do -- or commit to improving its performance in the region, said Jonathan Ziegler, an analyst with Salomon Bros., New York.