Tops Parent Posts Double-digit Net Sales Boost for 2010

In the wake of its January 2010 acquisition of most of Penn Traffic’s assets, including 55 stores, Tops Holding Corp., the parent company of Tops Markets, LLC, reported net sales of $530.8 million in its fourth quarter of fiscal 2010, a 12-week period ended Jan. 1, an increase of $106.4 million, or 25.1 percent, vs. the year-ago period.

“This was a transformational year for Tops, as we expanded our geographic reach, substantially grew our business and strengthened our franchise with the acquisition of Penn Traffic,” noted Tops president and CEO Frank Curci. “Our new customers have enthusiastically welcomed us into their communities, and thanks to our hard-working and talented employees, we have successfully integrated all of the acquired supermarkets. With the integration now complete, we will focus on growth from the leveraging of our increased footprint.”

Inside sales were $493.0 million in the fourth quarter or 2010, up $101.1 million, or 25.8 percent, from last year. The increase in inside sales is attributable to the acquired Penn Traffic supermarkets ,which contributed $132.1 million, and the opening of a new supermarket in August 2010, partly offset by an additional week of sales during the fiscal 2009 fourth quarter. Excluding the extra week, same-store sales for the comparable weeks dipped 0.7 percent because of an approximately 1 percent adverse effect of the acquired stores on Tops’ legacy supermarkets.

“Given the challenging operating environment this past year, our inside sales results truly reflect how successful our sales and marketing programs were in building the overall business and regaining lost Penn Traffic customers,” observed Tops SVP and CFO Rick Mills.

Gas sales rose $5.3 million, or 16.2 percent, to $37.8 million in the fourth quarter, reflecting a 10.5 percent increase in the retail price per gallon and a 5.2 percent increase in the number of gallons sold. The increase in gallons sold was because of four new gas stations Tops has opened since the 2009 fourth quarter.

Gross profit for the quarter grew 23.5 percent to $142.4 million, from $115.3 million in the year-ago period, primarily due to the addition of the Penn Traffic stores. Total operating expenses increased 28.4 percent to $140.7 million, vs. $109.6 million last year. The increase was mainly because of incremental costs related to operating the acquired Penn Traffic supermarkets, including $2.2 million of nonrecurring integration expenses.

Net loss for the quarter was $13.8 million, compared with a net loss of $24.3 million in the year-ago period, due to the expense of a $13.9 million deferred tax asset valuation allowance, in addition to a $7.3 million loss on debt extinguishment associated with the company’s October 2009 debt refinancing.

Fiscal 2010 net sales came to $2.26 billion, a rise $561.9 million, or 33.1 percent, vs. $1.70 billion for fiscal 2009. The company attributed this increase to the acquired Penn Traffic supermarkets, which contributed $553.0 million, and a 29.1 percent increase in gas sales. Excluding an additional week in 2009, same-store sales improved 0.1 percent, in spite of difficult economic conditions for supermarket operators and the effect of the acquired stores on Tops existing supermarkets.

Cap ex for fiscal 2010 was $49.7 million, compared with $28.1 million for fiscal 2009. Store remodels and rebannering efforts made up the majority of the 2010 capital expenditures. Tops expects to invest $35 million to $45 million in capital expenditures during the next 12 months.

Tops is still awaiting approval of a final order by the FTC regarding seven of the Penn Traffic stores it acquired, which the commission had directed the company to sell. Net sales and operating income for the seven supermarkets were $54.2 million and $0.8 million, respectively, for fiscal 2010.

Williamsville, N.Y.-based Tops Markets operates 128 corporate full-service supermarkets, and an additional five franchise supermarkets, and employs about 12,700 associates.