SANFORD, N.C. -- The Pantry Inc. is laying off about 60 people as the Southeast's largest independent convenience store chain tries to trim expenses and compensate for lower-than-expected gasoline profit margins, reported The News & Observer.
The move, which was announced Thursday and reported in CSP Daily News on Friday, is expected to result in a $6 million savings for the retailer in its next fiscal year.
The jobs are mostly district managers and regional vice presidents and are outside of North Carolina, Pantry president [image-nocss] and CEO Peter Sodini told the newspaper. Employees have already been notified, he added.
Sodini called the layoffs a cautionary move for the chain of 1,645 convenience stores, mostly under the Kangaroo name. The Pantry employs more than 13,000 people throughout the Southeast.
This simply reflects the fact that gasoline margins have stayed very tight, and we're not going to gamble anymore with the world the way it is and crude [oil] at $82 a barrel, he said. We don't know when the climate is going to change.
Thursday's announcement, which was made just after the close of the company's fiscal 2007 year, came with a warning that gas margins will be lower than expected when the company releases its year-end results. Instead of the 11.5 cents profit per gallon that was expected for the year, the company said profits will be more like 10.9 cents per gallon.
Retailers such as The Pantry have been experiencing lower profits because tropical storms, political concerns and unexpected refinery shutdowns this summer have kept oil prices abnormally high and volatile, said the report. When gasoline prices fluctuate dramatically, often profit margins shrink because competitive pressures keep prices at the pump down even though the cost of gasoline is rising.
According to The Pantry's Security & Exchange Commision (SEC) filing: "On Sept. 26, 2007, the company's management initiated a restructuring program aimed at reducing operating, general and administrative expenses by approximately $6 million in fiscal 2008, which program includes severance of certain of the company's employees. The company initiated this program as part of its ongoing efforts to proactively and prudently manage operating, general and administrative costs, and as a result of recent pressures on the convenience store industry, including without limitation, political and economic conditions, tropical storms and unexpected refinery shutdowns, each of which has negatively impacted profit margins by, among other things, keeping oil prices abnormally high and volatile. The program is expected to be completed during the first fiscal quarter of 2008. The company expects to record a one-time restructuring charge of approximately $2 to $3 million during the fourth quarter of fiscal 2007, primarily as a result of certain one-time termination benefits that will be provided in connection with the program."
The news sent the company's stock down 6% to close at $26.96. The stock has lost more than half its value in the past year, according to the report.
Sodini said the company still plans to move the executive offices to Cary some time in 2009, reported the paper. A site has not been selected yet.
The company's 2007 fiscal year profit is down compared with a record 2006. But other metrics, such as same-store sales, merchandise sales and number of gallons sold rose. The company expects gasoline profits in fiscal 2008 to range between 11 and 13 cents per gallon for the year. Merchandise sales will increase 10% to about $1.7 billion, and the chain will sell about 2.3 billion gallons of gasoline, an 11% increase.
Sodini said that there will likely be no major acquisitions from the company in the next four to six months, a shift for a company that has grown rapidly by buying other c- store chains. There's nothing meaningful on the horizon, he said.
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