Penn Traffic Still 'Rebuilding'; Comps Still Down

SYRACUSE, N.Y. -- Penn Traffic Co. here has been quite busy making improvements since its last conference call, in October 2006, according to officials at the financially challenged grocer. "Much progress has been made," noted president and c.e.o. Bob Panasuk, "but there's still a lot to do."

Panasuk described the present time as one of "rebuilding the fundamentals of the company."

This rebuilding includes a brand-new management team; the implementation of a model-store program to improve displays, fresh standards, disciplines, and consistency across execution; a P&L education process to instill accountability and a sense of ownership at all levels of the organization; a training and development plan, which was "essentially nonexistent in past years," according to e.v.p. and c.o.o. Greg Young; and a business process development and refinement plan.

Among other organizational revamps was the elimination of the position of district manager, and the division of the stores into four geographic regions with the idea of more effectively deploying teams to focus on a limited number of stores. The district managers will be replaced by 24 zone managers, each a lead store manager who has a home store and also oversees between three and five stores "in a very tight geography," explained Young, adding that the new setup would "get people out of cars and into stores," for more frequent visits.

Additional changes were the anticipated closure of the company's GM/HBC warehouse in Jamestown, N.Y. this month, to be replaced by an outsourcing relationship; a three-year IT program that will see the installation of some self-checkouts in selected stores; a recently completed business segment profitability analysis undertaken across all of the company's units and expected to become an ongoing practice; the improvement and further development to the retailer's private label program, including the growth of the second-tier Valu Time brand to nearly 400 items, with more to come; and an "aggressive store reset program" involving 40 stores currently underway.

Cap ex plans included five major remodels, nine minor remodels, 16 mini remodels, and the implementation of a common POS platform by the end of the fiscal year. Since October 2006 the company has closed five retail stores, four in-store pharmacies, and two standalone pharmacies, the last of which Penn Traffic decided was a necessary consequence of its decision to focus on its core business of supermarkets.

Still, despite all the hard work, sales haven't rebounded yet. For the 48-week period ended Dec. 30, 2006, same-store sales declined 1.9 percent, while for the nine-week period ended Dec. 30 2006, they were down 3.1 percent. The company also reported for the periods a net loss per share of 50 cents and one cent, respectively.

Promising to review first-quarter results in a call sometime in May, Panasuk noted that he was "optimistic about our direction, our initial results, and our additional strategic opportunities that we're working on."
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