PENN TRAFFIC TO FOCUS MORE ON NEW STORES

MARK HAMSTRA

SYRACUSE, N.Y. -- Penn Traffic here last week said it would begin focusing more attention in the coming year on building new stores after remodeling, enlarging or replacing 80 of 216 supermarkets during the past three years.

During a conference call discussing first-quarter earnings, the parent of the Big Bear chain, which also operates other formats, said it would open five new stores in the coming year and expects to begin construction on at least two additional stores this year and has plans for several additional new and replacement stores in the coming years.

Martin A. Fox, chief financial officer, said Penn Traffic invested $135 million since mid-1999 to upgrade its store base and make other improvements in technology and infrastructure.

"Now that we've made these significant investments in our store base, our emphasis will shift someone to the construction of new or replacement stores," he said.

The company plans to spend $65 million this year on upgrading its store base and infrastructure.

Other initiatives the company is taking include more targeted promotions and an effort, which started last fall, to reduce shrink in the produce department. Several technology initiatives also are under way, including the rollout of a new point-of-sale system, labor-saving programs in the company's warehouses and a document-imaging system that could save $400,000.

Net income for the first quarter, which ended May 4, was $1.1 million, compared with $200,000 in the year-ago period. Revenues decreased less than 1%, to $576.4 million, compared with results from the year-ago period. The company attributed the revenue decline to store closings. Same-store sales improved 0.6% for the quarter.

The company said it expects increased competition in the near term in the form of 25 to 30 competitive openings, including eight Wal-Mart supercenters and one Meijer supercenter.

Also, Fox said it would be a challenge "to offset the very significant increase in employee benefit costs."