SAN BERNARDINO, Calif. — Stater Bros. Markets here said its sales and profits remain under pressure in the difficult economy and that it will wait until it sees signs the economy is recovering before it decides how to invest its surplus cash, Jack Brown, chairman and chief executive officer, told investors last week.
“We are considering our options for the $250 million we have in cash,” Brown said. “We have evaluated corporate uses for the funds, which could include a consideration to repurchase some bonds, and we also see opportunities to acquire stores — in fact, we've let our competitors know that if they have something for sale, we would like to be considered as a buyer, and those could be quick cash transactions.
“But we want to wait until we see signs that unemployment is down and store sales are improving.”
Unemployment in the San Bernardino-Riverside counties area where Stater operates most of its stores is nearly 15% for the second year in a row, Brown noted, and customer counts are down.
However, he said he does see some indications the situation may be easing, noting that floral sales for Mother's Day were nearly at the same level as a year ago, “which tells us there may be a little more discretionary money out there.”
But with most supermarket operators reporting sales declines of about 6%, “we're still in what I'd call a financial tsunami,” Brown said.
He made his remarks during a conference call to discuss financial results for the second quarter that ended March 28. Net income for the 13-week quarter fell 46% to $6 million, while sales declined 4.9% to $885.5 million and same-store sales dropped 3.1%. Excluding volume at Santee Dairy, a wholly owned subsidiary whose assets were sold last October, supermarket sales for the quarter fell 2.3% to $864.5 million.
For the 26-week period, net income fell 13.6% to $12.7 million, while sales fell 4.2% to $1.8 billion, and same store sales fell 2.7%. Excluding Santee volume, supermarket sales for the year to date dropped 1.7% to $1.77 billion.
“We have made a conscious effort to keep prices low to help our customers get the most out of their shopping dollars and to retain customers,” Brown said. “We remain committed to cost control as we navigate through this national economic recovery.”
He said Stater continues to invest in pricing “because the customer is pretty much bare-boned right now. But this situation won't last forever, and when our customers get more, we'll get more. We're helping any way we can, because we think they will have a long memory.”
Brown said Stater is on schedule this year to open two replacement stores and to complete five or six remodels, at a capital cost of approximately $35.4 million.
Brown said other large chains have closed eight competing stores while opening only one new unit in Stater's area.