SANFORD, N.C. -- Following a challenging fiscal 2007 marred by disappointing gasoline margins, Peter Sodini said during a company earnings conference call yesterday that he and others at The Pantry are "pleased with the improvement in earnings [in first-quarter 2008] versus last year."
Sodini, chairman and CEO of the Pantry, said the improvement came "despite very challenging conditions in the gasoline market through most of the quarter. We did get some relief in terms of lower gas prices in December, which enabled us to achieve a retail gross margin for the quarter of 10.6 cents a gallon, [image-nocss] nearly two full cents above last year's first quarter" average of 8.7 cents per gallon.
While Sodini said he is happy to see some improvement, he added, "This margin is still well below our normal, seasonal first quarters, if you look at past years."
Retail gasoline gallons sold in the quarter increased 14.3% overall, but declined 2.8% on a comparable store basis, according to Sodini. Retail gasoline revenues rose 50.7%. The average retail price per gallon was $2.92, up sharply from $2.21 during the first quarter of fiscal 2007. Gasoline gross profits for the quarter totaled $56.2 million, up 39.6% from $40.2 million in last year's first quarter.
Total revenues for the quarter were approximately $2 billion, a 43.2% increase from the first quarter of fiscal 2007. Net income was $3.2 million, or $0.15 per share on a diluted basis, compared with $125,000, or $0.01 per share, a year ago. EBITDA for the quarter was $53.6 million, up 51.6% from $35.3 million a year ago.
"Our favorable earnings comparison for the first quarter primarily reflects an improvement in retail gasoline margins from unusually depressed levels a year ago," Sodini said. "In our merchandise business, we again achieved double-digit percentage growth in both total revenues and gross profits, mainly due to acquisitions and new-store openings. Expenses were well contained and below our expectations, reflecting the benefits of our recent restructuring program, as well as additional efficiency gains across our store operations."
Merchandise revenues for the first quarter were up 13.2% overall and 0.8% on a comparable-store basis. The merchandise gross margin was 37.0%, compared with 37.6% in the corresponding period last year. Total merchandise gross profits for the quarter were $146.4 million, an 11.5% increase from a year ago.
The Pantry acquired three convenience stores in the Charleston, S.C., market and opened four new large-format stores during the quarter. The company also closed six stores during the quarter.
The company now expects that fiscal 2008 merchandise sales and gasoline gallons may be below its previous expectations due to the recent softening of consumer spending in its market areas. The company expects comparable-store merchandise sales in fiscal 2008 may be relatively flat to slightly down, with total merchandise sales between $1.6 billion and $1.7 billion.
Comparable-store gasoline gallons sold are expected to be down slightly with total retail gasoline volume for fiscal 2008 of between 2.1 billion to 2.2 billion gallons. The company now expects that fiscal 2008 store operating and general and administrative expenses will total between $615 million and $630 million, compared with our previous expectation of a range of $633 million to $643 million.
The company continues to expect a merchandise gross-profit margin of approximately 37% and retail gasoline margins between 11 and 13 cents per gallon for the full year. These expectations do not account for the potential effect of possible acquisitions during the remainder of the fiscal year.
Based in Sanford, N.C., The Pantry is a leading independently operated convenience-store chain in the southeastern United States and one of the largest independently operated convenience-store chains in the country, with revenues for fiscal 2007 of approximately $6.9 billion. As of Dec. 27, 2007, the company operated 1,644 stores in 11 states under the Kangaroo Express and other store banners.
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