MATTHEWS, N.C. — Falling prices and value-conscious shoppers contributed to a 2.4% quarterly same-store sales decrease at Harris Teeter here, despite the chain drawing more shoppers and selling more items on a comparable basis.
Financial results for the fiscal fourth quarter, which ended Sept. 27, showed supermarket sales of $984.5 million, an increase of 3.8% from the same period a year ago, while gross profits were flat at $293 million. Quarterly earnings, which include results from American & Efird, a textile company also owned by Ruddick, decreased 4.8% to $23.6 million.
The company said deflation and price and promotion investments pressured profits at Harris Teeter, although expense reductions offset much of the investment. The sales increase was attributable to new stores, and offset by cannibalization, deflation, a shift to private-label items and a decrease in discretionary categories, including floral, tobacco and general merchandise.
“I am encouraged by the refinements we are making to our merchandising strategies during these times of economic uncertainty and constantly changing consumer behavior,” Thomas W. Dickson, chairman, chief executive officer and president of Ruddick, said in a statement. “We made investments in promotional activity, as well as price, to drive customer shopping visits and loyalty, while remaining focused on enhancing the overall value we deliver to our customers.”
Karen Short, an analyst with BMO Capital Markets, in a research note said the results, given the economic conditions and performance of peers, were “a testament to management's strength.”
“Harris Teeter was highly promotional this quarter as evidenced by the gross margin decline, but promotions drove positive traffic and tonnage,” Short noted.
The company said it was maintaining a “cautious” outlook for fiscal 2010. Harris Teeter plans about $155 million in capital expenditures (down from $209.2 million in fiscal 2009), primarily directed toward 13 new stores, including two replacement stores and two major remodels.
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