SYRACUSE, N.Y. — Sales slowed and losses continued for Penn Traffic in fiscal 2009, but the retailer insisted the strategic actions it took during the year could soon pay off.
Penn Traffic closed 21 stores and turned over its warehouse and distribution business to a third party, C&S Wholesale Grocers, during the 2009 fiscal year, which ended Jan. 31. These moves contributed to a decrease in revenues but left the retailer with a stronger group of core stores, officials said in a conference call discussing results. The spin-off of the distribution business in the meantime helped Penn Traffic post a quarterly profit, while proceeds were applied toward debt reduction.
The company posted a $17.6 million loss for the fiscal year, down from a loss of $41.7 in 2008. Annual operating losses accelerated to $22.6 million on sales of $872.3 million — a 2.6% sales decrease. For the fourth quarter, Penn Traffic posted net income of $3.8 million on $218 million in sales, with the profit coming entirely out of the $18.2 million gain from the sale of its distribution business. Sales were down 2.4% among continuing stores.
“I think it's fair to say that fiscal 2009 was a year of important milestones for Penn Traffic,” Gregory J. Young, president and chief executive officer, said in a conference call discussing the results. “We made a number of major strides both in terms of strategic accomplishments and execution of key technical changes, and as a result we have Penn Traffic and its resources focused on the grocery retail business like never before.”
Young cited progress in Penn Traffic's strategic plan during the year. The store reductions — with two more closures set for early next month — leave a core of P&C, Quality Food and BiLo stores that will be distinguished by freshness, value pricing, convenience and service, Young said. Those stores are getting more investments in tools, training and technology.
“Penn Traffic does not have the luxury of carrying stores that cannot complete or achieve sustainable levels of profitability,” he said.
Penn Traffic also made big cuts in administrative expenses during the year — including recently disclosed salary and benefit reductions for hourly employees and corporate staff estimated to save $1.2 million this year. “The more successful we are at reducing overhead, the more resources we can put back into the customer shopping experience and the closer we'll get to restoring profitability,” Tod Nestor, chief financial officer, said.
Same-store sales decreased by 3.3% for the quarter and 1.7% for the fiscal year. Nestor said stores saw lower volume and traffic trends as a result of the economy. When the downturn intensified last fall, Penn Traffic did not pass along all of its higher costs to customers for competitive reasons.
