Harris Teeter Q3 Sales Rise, But Comps, Profit Suffer

Ruddick Corp., the parent company of Harris Teeter, said yesterday that consolidated sales for its fiscal third quarter ended June 28, 2009, rose 1.1 percent to $1.02 billion, from $1.01 billion in year-ago period. For the 39 weeks ended June 28, 2009, consolidated sales of $3.03 billion were 2.2 percent above the $2.97 billion racked up last year. The company attributed the sales growth to sales increases at Harris Teeter, which were partially offset by sales declines at American & Efird (A&E), Ruddick’s sewing thread and technical textiles subsidiary.

Harris Teeter’s sales rose 4.1 percent to $964.2 million in the third quarter, vs. $926.3 million in the year-ago period. For the 39-week period, sales grew 4.7 percent to $2.84 billion from $2.72 billion last year. These sales increases were because of incremental new stores and were partially offset by comparable-store sales decreases of 1.42 percent for the quarter and 1.15 percent for the 39-week period, Ruddick said.

Third-quarter comps were negatively affected by the shift of the Easter holiday from the second quarter in fiscal 2008 to the third quarter in fiscal 2009. Comps also suffered as a result of changes in consumer buying habits during the recession and, to a certain extent, the cannibalization created by opening stores near existing locations in certain key major markets, the company noted. Additionally, Ruddick said, Harris Teeter experienced a higher percentage of sales of its value-priced store-brand products, as well as sales declines in such discretionary categories as floral, health and beauty, and some general merchandise during the first three quarters of fiscal 2009.

During the first three quarters of fiscal 2009, Harris Teeter opened 11 new stores, closed one existing store (which was replaced by a new store), and completed the major remodeling of two locations.

Operating profit at the chain was $42.8 million (4.44 percent of sales) for the third quarter of fiscal 2009, vs. $44.5 million (4.81 percent of sales) in the year-ago period. For the 39-week period, operating profit was $132.1 million (4.65 percent of sales), compared with $135.1 million (4.98 percent of sales) last year. The decrease in operating profit resulted primarily from additional promotional activity designed to provide more value to customers, Ruddick explained, adding that the sales increases, as well as an ongoing emphasis on operational efficiencies and cost controls, have provided the leverage to partially offset the added costs related to this increased promotional activity, along with a new-store program, higher associate benefit costs, credit and debit card fees, and other occupancy costs.

“We continue to experience changes in our customers’ spending habits and shopping demands during this time of economic uncertainty,” noted Ruddick chairman, president and CEO Thomas W. Dickson. “Our customers continue to look for value, and we remain focused on enhancing the overall value we deliver to our customers while maintaining or increasing our customer base. We continue to make investments in promotional activity, as well as price, to drive customer shopping visits and loyalty … We remain focused on the customer and meeting their needs, while delivering the quality, value and customer service they have come to expect from us.”

Harris Teeter plans to open another four new stores, one of which will replace an existing store, and complete a major renovation on one more store, during the remainder of fiscal 2009. The division’s cap ex plans include the continued expansion of its existing markets, including the Washington, D.C. metro area, but the current economy has driven Harris Teeter to cut back on or delayed the number of new store openings originally planned for fiscal years 2009 and 2010 and beyond.

The company said it would continue to fine-tune its merchandising strategies in response to changing shopping demands during the economic slump. Any operating improvement would depend on Ruddick’s ability to continue to boost Harris Teeter’s market share, rationalize A&E’s operations, offset increased operating costs with additional operating efficiencies, and carry out strategic expansion plans effectively.

Charlotte, N.C.-based Ruddick Corp. has two primary operating subsidiaries: Harris Teeter, Inc., a regional supermarket chain with operations in eight Southeastern states, and American & Efird, Inc., a manufacturer and distributor of industrial sewing thread, embroidery thread and technical textiles.
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