Harris Teeter's sales increase was because of incremental new stores and was partially offset by a decline in comparable-store sales of 2.12 percent for the quarter, according to Charlotte, N.C.-based Ruddick. Comps were adversely affected by the timing of the New Year's holiday and changes in consumer buying habits created by the current economic environment. For instance, during the quarter Harris Teeter realized a higher percentage of sales of its lower-priced store-brand items and sales declines in more discretionary items such as floral and certain general merchandise.
Operating profit at Harris Teeter in the quarter grew 0.2 percent to $44.3 million (4.77 percent of sales), from $44.2 million (4.93 percent of sales) in year-ago period, affected by new store pre-opening costs of $4.0 million (0.43 percent of sales) and $3.7 million (0.41 percent of sales) in the first quarter of fiscal 2009 and fiscal 2008, respectively.
Despite the decline in comps, Harris Teeter's operating profit improved, thanks to the implementation of more expense reduction programs designed to achieve operational efficiencies, including waste containment, improved labor management and cost controls in support departments.
"We, like everyone else, are facing unprecedented economic uncertainty, tumultuous market conditions, and a decreasing level of consumer confidence resulting in reduced consumer spending," noted Ruddick chairman, president and CEO Thomas W. Dickson. "We have continued to adjust our promotional spending in response to this change to encourage and drive customer loyalty and shopping visits."
Added Dickson, "We continue to position Harris Teeter for long-term success while taking into consideration the current economic environment and its impact on our capital expenditure program."
Among the cost-cutting measures planned by Harris Teeter is the reduction of its fiscal 2009 capital expenditure plan by $29 million to $212 million and the revision of its fiscal 2010 capital expenditures to about $150 million, 29 percent less than fiscal 2009, and the construction of a $100 million distribution center outside Fredericksburg, Va., slated to open in 2012, which will, according to Dickson, "result in significant transportation expense savings."
The chain plans to open 16 new stores, two of which will replace existing stores and complete the major remodeling on one additional store, which will be expanded in size, during the rest of fiscal 2009. Harris Teeter will expand further into its existing markets, including the Washington, D.C. metro market area incorporating northern Virginia, the District of Columbia, southern Maryland and coastal Delaware. Because of the current state of the economy, however, the supermarket operator has reduced or delayed the number of new store openings originally scheduled for this year, as well as fiscal 2010 and beyond.
Harris Teeter operates 176 stores in eight states along the eastern seaboard and the District of Columbia.