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Pathmark Sets New Prototype in Motion; Posts 'Disappointing' Q4, Full Year

CARTERET, N.J. -- Pathmark Stores, Inc., based here, is readying an extensive remodeling program based on a new prototype, chain officials said yesterday in a conference call that also discussed fourth quarter and full year results.

During the conference call yesterday, c.e.o. John Standley talked candidly about the chain's improvement strategies, among them a new store prototype that Pathmark is in "the early stages" of developing, with the key elements to be used in all renovations once the process is complete in about six months' time.

According to Standley, the company is planning 16 renovations for 2006: eight extensive remodels using current concepts and eight smaller-scale expansions of some departments in high-volume stores. Pathmark has no plans to build any new stores for the year, he added, as the company wishes to complete the prototype remodeling process first.

The major remodels are expected to cost between $3 million and $3.5 million each, while the smaller revamps will run between $1.2 million and $1.3 million, with expected sales increases in overhauled locations of between 5 percent and 12 percent, according to Pathmark.

New co-president Ken Martindale spoke during the call in general terms about various merchandising and service initiatives scheduled for 2006, which he said the company would be "anxious" to talk about in future conference calls. He did refer specifically to the corporate branding team's plan of "extensive revitalization of Pathmark brand items," including a more strategic assortment, higher quality standards, and category and brand introductions.

Martindale also said that the retailer aimed to shorten the construction period and merchandising schedule of stores undergoing remodeling, not only to minimize any shopper disruption, but also to realize post-renovation sales increases much more quickly.

The call came to a close with s.v.p. of retail development Harvey Gutman's announcement that he will officially be leaving Pathmark this week after 30 years to take up his new career as a consultant, in which capacity he will continue to work closely with the retailer, remaining as its investor contact. PG reported in February that Gutman accepted the buyout offered by Pathmark to eligible employees.

Meanwhile, acknowledging that its return to financial health will take time, reported sales of $993.3 million for the fourth quarter of fiscal 2005 ended Jan. 28, a decline of 0.4 percent from $996.8 million in the year-ago period, while same-store sales dipped 0.8 percent.

On a more positive note, the company considerably narrowed its net loss to $14.6 million, or 28 cents per diluted share, from a net loss of $301.6 million, or $10.03 per diluted share, in the fourth quarter of fiscal 2004.

Pathmark's sales for fiscal 2005 were $3,977.0 million, compared with $3,978.5 million for fiscal 2004, and same-store sales declined 0.8 percent. The Northeast regional grocer reported a net loss of $40.1 million, or 92 cents per diluted share, in fiscal 2005, compared to a net loss of $308.6 million, or $10.26 per diluted share, last year.

Pathmark's capital investments in fiscal 2005 came to $64.5 million. During that time the company opened two new stores, one of which was a replacement store; closed four stores; and completed eight store renovations. According to the retail, total capital investments for fiscal 2006 are expected to be approximately $70 million.

In a statement Standley said: "Fiscal 2005 was a year of transition. The first half was focused on the review of strategic alternatives, which led to the Yucaipa transaction. During the second half of the year we began making important investments to improve the long-term health of our business. These investments included the merchandising and store initiative, which refreshed the look and added new merchandise to our stores, a store-level labor buyout and administrative cost reduction program, and the strengthening of our management team. While our financial results for the fourth quarter and full year were disappointing, we believe that the steps we have taken will lead to a stronger Pathmark in fiscal 2006."

Pathmark currently operates 141 supermarkets primarily in the New York-New Jersey and Philadelphia metropolitan areas.
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