PENN TRAFFIC EXECUTIVE DIXON SET TO RETIRE

ELLIOT ZWIEBACH

SYRACUSE, N.Y. -- Penn Traffic Co. here said John T. Dixon, 56, will retire as president and chief executive officer for personal and health reasons on Sept. 30.

Gary D. Hirsch, chairman, will assume Dixon's responsibilities while the company conducts "a careful and exhaustive search" for a permanent successor -- a process observers expect to take three to six months.

The change appears to come at a challenging time for the company, which in recent periods has attempted to turn around its financial results and to reposition its merchandising and cost structure. In other developments:

Penn Traffic reported a loss and a sales decline last week for the 13-week second quarter ended Aug. 3.

The company said a work stoppage is entering its second month at Sani-Dairy, Johnstown, Pa., its full-line dairy division.

Dixon has spent almost 40 years with Penn Traffic and its various divisions, including nearly 19 months as president and CEO.

He joined Big Bear Markets, Columbus, Ohio, in 1957 and remained there after the company was acquired by Penn Traffic in 1989. Dixon was subsequently named president of the company's Quality Markets division in 1992 and president of its P&C Foods division in 1993. He became president and CEO of the parent company in January 1995.

"Over the past 18 months our company has been through some adversity as we adjust to changing industry dynamics.

John has been a leader in implementing the strategies we are pursuing to improve our company," Hirsch said.

"John helped start these programs, and his past efforts will contribute to Penn Traffic's future successes."

According to Martin Fox, vice chairman of finance, Penn Traffic does not plan to promote anyone from within to succeed Dixon. "We're using this as an opportunity to bring in someone from the outside that we think will be helpful," he said.

One analyst said Penn Traffic has reported declining same-store sales for the last four quarters and declining cash flow in three of the last five quarters.

The loss for the second quarter was $10.1 million, compared with a loss of $51.7 million a year ago, while results for the half showed a loss of $19.2 million, compared with a loss of $51.6 million last year. Last year's second quarter included an unusual charge of $51.9 million after taxes.

Sales fell 4.7% for the quarter to $842.8 million and 4.2% for the 26 weeks to $1.7 billion, while same-store sales dropped 3.6% for the quarter and approximately 2.3% for the half. Prior year revenues include $11.3 million generated by 11 Harts general merchandise stores and two former Acme stores, all of which were closed after last year's second quarter.

The company's contract with 230 employees at its dairy expired May 15 and the work stoppage commenced Aug. 1.

The company said meetings with the union are ongoing, despite the work stoppage there. An analyst said he would not be surprised if Penn Traffic opts to outsource its dairy needs if it cannot reach an equitable agreement with the union.

Hirsch said the company has been focusing on increased customer service, improved perishables departments and lower operating costs.