Comps, Profits Down at Gelson’s

Arden Group, Inc., parent company of Los Angeles-based Gelson’s Markets which operates eighteen full-service supermarkets in Southern California, saw its comparable store sales and its profits decrease for both the fiscal quarter and year ended January 1.

Same store sales from the grocer’s 18 supermarkets decreased by 0.6 percent for the quarter and 3.1 percent for the year.

Operating income decreased in the fourth quarter and fiscal year of 2010 compared to the same periods of the prior year primarily due to an increase in health and welfare costs related to a union multi-employer plan to which the company contributes. The increase was effective in March 2010 and has resulted in an average weekly increase in expense of approximately $74,000.

Effective in February 2011, the company’s agreement with the union also allowed for an additional increase in the health and welfare contribution rate resulting in a further increase in the Company’s costs of approximately $11,000 per week.

In the fourth quarter of 2010, Arden Group recognized a gain of $570,000 from the early termination of a lease for a property that was not being used in current operations. Additionally, it saw stock appreciation rights (SARs) compensation expense of $90,000 in the fourth quarter of 2010 compared to a reversal of previously recognized SARs compensation expense of $559,000 in the same period of the prior year.

The Company’s collective bargaining agreement with the United Food & Commercial Workers International Union expired on March 6, 2011. The UFCW’s contract with the three major grocery retailers in its trade area – Vons, Ralphs, and Albertsons grocery chains – also expired on the same date. The three chains are currently in negotiations with the UFCW to renew their collective bargaining agreements. Gelson’s has signed an extension agreement with the UFCW pending the outcome of the UFCW’s negotiations with the chains which obligates Gelson’s to any changes agreed to by the Majors in hourly wage rates and contributions to the benefit plans.