Tops Holding Corp., the parent company of grocery chain Tops Markets LLC, reported net sales for the 16-week first quarter ended April 23 of $717.3 million, an increase of $52.2 million, or 7.9 percent, from the $665.0 million posted in the year-ago period.
“Our strong results demonstrate the strength of our strategy to build our franchise, succeed in our markets by understanding our customers and create value with our sales and marketing approach,” noted Frank Curci, president and CEO of Williamsville, N.Y.-based Tops. “We believe we have been highly effective with the integration and conversion of the Penn Traffic stores into our well-known Tops brand, while our steady increase in the number of fuel stations available to our customers and our relentless focus on upgrading and redesigning our stores to keep them fresh and innovative are contributing to our growth.”
Inside sales were $658.9 million in the fiscal 2011 first quarter, up $34.9 million, or 5.6 percent, vs. last year. Tops attributed the increase to an extra four weeks of operations for the 55 Penn Traffic supermarkets that were retained and operated through the end of the quarter, along with the added results of a new Tops supermarket that opened last summer, and a 3.6 percent rise in same-store sales. Also affecting the year-over-year results was $33.0 million in net sales reported in the prior-year first quarter for 24 acquired supermarkets that were either sold or closed in 2010.
Gasoline sales grew $17.3 million, or 42.2 percent, to $58.4 million in the fiscal 2011 first quarter, which Tops said was because of a 23.4 percent increase in the retail price per gallon and a 15.2 percent increase in the number of gallons sold. The increase in gallons sold was mainly due to four new gas stations that have opened since the fiscal 2010 first quarter, according to the grocer.
Gross profit for the quarter rose 4.4 percent to $202.4 million from $193.8 last year, primarily because of the additional four-week contribution of the former Penn Traffic stores.
Total operating expenses for the quarter improved to $184.8 million, compared with $196.6 million in the year-ago period. Last year’s first quarter was affected by $17.4 million in costs connected with the Penn Traffic acquisition and integration, Tops explained. Operating income for the quarter was $17.6 million, or 2.5 percent of net sales, which Tops called “a considerable improvement from an operating loss of $2.9 million in the prior year period,” explaining that the 24 stores that were closed or sold contributed an operating loss of $0.2 million during the first quarter of 2010.
Net loss for the first quarter of 2011 was $2.1 million, vs. $3.3 million last year, reflecting an income tax benefit of $9.9 million resulting from the $10.3 million reversal of valuation allowance established in fiscal 2009.
“Our solid operating income is an excellent indicator of our ability to leverage our system with increased volume,” said SVP and CFO Rick Mills. “As we effectively capitalize on the strength of the Tops brand to build our store traffic while continually finding ways to improve our productivity, we expect we can continue to strengthen margins and drive strong cash generation.”
All of the 55 acquired supermarkets the company operates have been converted to the Tops banner, except for the seven supermarkets under an FTC proposed order to be sold. Last month, Tops petitioned the commission to approve an agreement to sell three of the supermarkets, but there has been no decision given as yet. Net sales and operating loss for the seven supermarkets under the order were $17.2 million and $0.1 million, respectively, for the fiscal 2011 first quarter.
Capital expenditures for the first quarter of fiscal 2011 were $17.0 million, vs. $8.8 million for the prior last year, and were mainly related to store remodels, noted Tops, which added that it intends to invest about $40 million in cap ex over the next 12 months.
“Although there are subtle indications of an improving economy, we continue to see a very challenging operating environment with a combination of high unemployment and rising prices,” observed Curci. “We are working hard to contain price increases for our customers through strong purchasing practices and continued productivity improvements. Nonetheless, we are very excited about our future as we plan to expand the number of stores in our markets, continue to remodel existing stores while developing our distinctive, smaller neighborhood stores and finding new, innovative ways to reach our consumers.”
Employing around 12,700 associates, Tops operates 128 corporate full-service supermarkets and an additional five franchise supermarkets in upstate New York and northern Pennsylvania.