PATHMARK EXECUTIVES SEE COMPETITION 'NORMALIZING'

David Ghitelman

CARTERET, N.J. -- Pathmark Stores here said last week it saw competitive activity winding down in its markets.

During a conference call with industry analysts to discuss results for the first quarter ended May 3, Eileen Scott, Pathmark's chief executive officer, said, "We have benefited from the normalizing of the most intense promotional activity.

"It is not as frenetic as it was even just a quarter ago."

Frank Vitrano, Pathmark's president and chief financial officer, noted that the company expected to see between 33 and 34 competitive store openings in 2003, compared with a record of more than 60 in 1998.

In the first quarter, Pathmark's sales rose 2.9% to $1 billion, and same-store sales increased 1.9%.

Scott attributed the sales increase in part to the company's shift from a Sunday to a Friday advertising day, which allowed for "better store conditions" on peak weekend shopping days.

She also said the company, which had gained market share "modestly" in 2002, "saw a marked jump in the quarter."

Another factor that contributed to the sales increase was the snowy weather in the first quarter, Vitrano said, although he added that "the profit from the snow was offset by snow removal costs."

Perhaps also snow-related was a slight decline in store traffic in the quarter, he noted, which was offset by a "trend we have seen for a while, an increase in the average order size."

However, while the top line grew, Pathmark's first-quarter net income declined 57.1% to $900,000, and earnings per share were 3 cents, vs. 7 cents in the previous first quarter.

The company attributed the decline in income to $5.1 million pretax charges for a labor-buyout program and an administrative staff-reduction program, which was only partially offset by $1.6 million pretax gain from the sale of non-retail real estate.

Vitrano said the company expects to realize $7 million in benefits this year and an annualized benefit of $10.5 million from the labor buyout and staff-reduction programs, both of which were previously announced. He noted that 72 administrative positions were eliminated, including those of 41 staffers who took early retirement, and more than 130 store-level works participated in the labor buyout program.