Harris Teeter Posts Higher Q3 Sales, Profit

Ruddick Corp. reported that consolidated sales for the fiscal third quarter ended July 3 increased 8.1 percent to $1.19 billion, from $1.10 billion in the year-ago period. For the 39 weeks ended July 3, consolidated sales at the Charlotte, N.C.-based company grew 6.7 percent to $3.43 billion from $3.21 billion last year. Ruddick attributed the increases to sales growth at both of its operating subsidiaries: grocery subsidiary Harris Teeter and American & Efird, a sewing thread and technical textiles subsidiary.

Harris Teeter’s sales rose 8.1 percent to $1.10 billion in the third quarter of fiscal 2011, compared with sales of $1.02 billion in the year-ago period. For the 39 weeks ended July 3, sales increased 6.4 percent to $3.18 billion from $2.99 billion last year. These increases were due to a comparable-store sales rise of 4.37 percent for the quarter and 2.68 percent for the 39-week period, incremental new store sales and a one-week shift in the fiscal year, according to Ruddick.

Since the third quarter of fiscal 2010, Harris Teeter has opened six new stores (one a replacement location) and closed one store, for a net addition of five stores. The chain operated 204 stores at the close of the third quarter of fiscal 2011.

Harris Teeter’s operating profit for the third quarter of fiscal 2011 rose 17.5 percent to $50.7 million (4.60 percent of sales), vs. $43.1 million (4.23 percent of sales) in the year-ago period. For the 39 weeks ended July 3, operating profit increased 10.2 percent to $146.0 million (4.59 percent of sales), compared $132.5 million (4.43 percent of sales) last year. Operating profit was affected by new store pre-opening costs of $1.5 million (0.14 percent of sales) and $1.8 million (0.18 percent of sales) in the third quarters of fiscal 2011 and fiscal 2010, respectively, Ruddick noted.

Ruddick attributed the increase in Harris Teeter’s operating profit primarily to the grocer’s higher sales and its ongoing emphasis on operational efficiencies and cost controls. However, the gross profit margin for the chain decreased year over year mainly because of a LIFO charge of $5.9 million (0.54 percent of sales) for the quarter and $11.2 million (0.35 percent of sales) for the 39-week period, which exceeded the decrease in the gross profit margin between the respective periods.

“Despite an overall environment of slower economic growth, our customers have responded positively to our promotional activity, as evidenced by increases during the quarter in the number of units sold, number of customer visits and average basket size, which resulted in a 4.37 percent comparable-store sales increase,” said Ruddick chairman, president and CEO Thomas W. Dickson. “In addition, we continue to see a number of our customers increase their purchases of discretionary items such as premium meats and wines, specialty breads and cheese, and fresh produce, including organic items. Our quarterly results benefited greatly from the operational efficiencies gained in the past two years that have offset other rising costs. Given the state of the overall economy, we remain cautious in our expectations for the remainder of the year.”

According to Ruddick, Harris Teeter will keep fine-tuning its merchandising strategies in response to evolving shopping demands, and to maintain or grow its customer base.

During the fourth quarter of fiscal 2011, Harris Teeter plans to open one new store and complete major remodels on four stores. The new store development program for fiscal 2011 calls for seven new stores and is expected to result in a 3.4 percent increase in retail square footage, vs. a 6.4 percent rise in fiscal 2010. The decrease in expected square footage growth reflects Ruddick’s decision to delay new store openings in an uncertain economy.

Consolidated cap ex for Harris Teeter are expected to be $165 million for fiscal 2011 and $215 million for fiscal 2012. During fiscal 2012, Harris Teeter plans to open seven new stores (one a replacement location) and complete major remodels on 13 stores, six of which will be expanded in size. The anticipated increase in cap ex is due to higher remodel costs in fiscal 2012 for further expansions and a plan that calls for fiscal 2013 new stores to open earlier in the fiscal year. The chain intends to continue expanding in its existing markets, including the Washington, D.C., metro area encompassing northern Virginia, the District of Columbia, southern Maryland and coastal Delaware.