SAN BERNARDINO, Calif. — Stater Bros. Markets here is seeing increases in transactions and customer counts as it continues to hold the line on prices as part of its marketing strategy, Jack Brown, chairman and chief executive officer, told bondholders last week.
“We don’t want to lose our low price image, and the consumer appreciates the fact we drag our feet on any cost increases as long as we can to give them the benefit,” he explained.
Brown said Stater has been able to pass on inflation increases of “a little under 1%,” despite an overall increase of 2.5% to 3%. “Inflation was a bigger factor in the second half, and it was climbing steadily,” he noted. “But inflation is only a factor if the competition allows you to pass all of it through, which our competitors in Southern California do not.”
For the 13-week fourth quarter, which ended Sept. 25, net income increased 9.2% to $6.5 million while sales rose 5% to $941.8 million and comparable store sales also climbed 5%. For the fiscal year, net income was up 6.9% o $26.3 million, with sales rising 2.4% to $3.7 billion and comps up 2.5%.
Gross margin fell 67 basis points to 27.15% for the quarter and 6 basis points to 26.83% for the year. Asked if the decline during the quarter meant Stater was feeling more pressure from competitors, Brown replied, “No, it’s just that we became more aggressive. We don’t follow anyone’s prices, and we doubt the major chains we compete against focus on us or allow us to dictate what they do.”
In other comments during the call:
Brown said Stater cut power usage at store level during the year by 15%, for savings of approximately $2.5 million to $3 million.
The company will relocate two existing stores, whose leases are about to expire, into two larger former Albertsons units it acquired from Supervalu, he said. Those two stores are scheduled to open late in the year, he added.
An increase in sales in the chain’s floral and deli-bakery sections are indications of a slight recovery in the economy, Brown pointed out.
The company had the best Thanksgiving period in its 75-year history, Brown said; and business the day before Thanksgiving was the best single day in its history other than New Year’s Day during the 2003-2004 work stoppage in Southern California, he added.
