SYRACUSE, N.Y. — Penn Traffic Co. last week said ongoing efforts to reduce costs have not fully offset the volume declines it is experiencing.
The company reported a second-quarter loss of $7.3 million, more than double a year ago, as same-store sales fell 6.8%.
Most of the company's cost-cutting efforts involve SKU optimization and price optimization, which are tied to its agreement with C&S Wholesale Grocers, Keene, N.H., Gregory J. Young, president and chief executive officer, said.
Using the procurement expertise at C&S, “we can more easily source the optimal mix of products for our stores while they focus on the right items to support their wholesale business,” he said.
In analyzing categories for optimal assortment changes, Penn Traffic started with salad dressings, where it eliminated 46 underproductive product variations and added 26 new items that address emerging trends and growth, Young said.
That 20-SKU reduction, with an inventory dictated by consumer demand, “should have a favorable impact on our top line while reducing inventory and improving turnover,” he noted.
Penn Traffic has begun implementing a price optimization program “to offer greater value to consumers while allowing us to enhance margins in certain categories,” Young said. He said the agreement with C&S has enabled the chain to make needed adjustments “while keeping margin rates solid. [Though] we expect these efforts and others will be essential components of our strategy to stabilize the top line, our cost-saving initiatives have not fully offset the decline we've seen in volume, as our second-quarter results show.”
For the quarter that ended Aug. 1, the company said sales fell 8.6% to $208.8 million following the closure of seven locations. For the first half, the loss was $16.6 million, compared with $15.8 million a year ago, while sales fell 7.2% to $408.9 million.
“The economy and consumer concerns over declining wealth and financial security have caused both temporary and some permanent changes in shopping behavior,” Young said.
