"I'd like to take a moment to recognize the hardships so many of our associates have endured as a result of the severe weather that plagued our region of the country over the past month," Marks said during an earnings conference call yesterday. "Despite dealing with their own personal losses, Pantry employees consistently [image-nocss] went above and beyond to ensure that their customers' needs were met.
"Last week, I visited the hard-hit town of Ringgold, Ga., and saw firsthand the destruction wrought by the storm. There, we lost two stores, and several of our associates suffered severe personal losses. Yet through it all, they demonstrated a can-do attitude that was truly inspirational. We did lose two stores in Ringgold, and we are actively moving ahead now with plans to rebuild."
Marks noted that similar scenes have played out across several of the 13 states in which it does business, including Mississippi, Alabama, Tennessee and North Carolina.
"Let me say on behalf of the executive leadership team to everyone impacted by these events that we're truly grateful for your unwavering commitment to serving our guests," Marks said. "Our people responded heroically in terms of getting generators and getting back up and serving our customers."
In its second quarter, 2011, which ended March 31, The Pantry reported a net loss of $300,000 or a loss of cent per diluted share. This compares to a net loss of $166.1 million or a loss of $7.44 per diluted share in last year's second quarter. Excluding the impact of impairment charges, net income for the second quarter of fiscal 2011 was $200,000 or 1 cent per share, compared to a net loss of 13 cents per share in the prior year period.
Adjusted EBITDA grew 6% to $50.5 million, compared to $47.5 million a year ago. Comparable store merchandise revenue increased 2.0%. Merchandise gross margin improved to 34.3% from 33.8% in last year's second quarter and from 33.5% in the first quarter of fiscal 2011.
Fuel gross profit was $61.8 million, compared to $65.4 million a year ago. Keeping gasoline profits up was a concerted effort, Marks said, noting retail gasoline prices rose by more than 60 cents per gallon from January to March 31, reaching more than $3.60 a gallon.
"It's well chronicled that rising fuel prices pinch consumer discretionary spending, and it is equally well-known that retail fuel margins contract when costs increase," Marks said. "We responded to the fuel impact in two ways: First, approximately six weeks into the quarter, we adjusted our retail fuel pricing to compensate fully for the increase in our costs. Second, our efforts to raise productivity by eliminating low value-added activities continued to bear fruit and enabled us to move swiftly to rein in variable expenses."
Comparable store merchandise sales in the second quarter increased 2% and 1.8% excluding cigarettes. Total merchandise gross profit for the quarter was $145 million, an increase of 5% from the second quarter a year ago.
"I am pleased that we have now delivered four consecutive quarters of noncigarette comparable store merchandise sales increases," Marks said. "Our improving execution contributed to expanded gross margins, higher productivity, and ultimately adjusted EBITDA growth, despite persistently rising fuel prices. Of equal importance, we continued to make progress against our core strategic initiatives of foodservice expansion and productivity growth."
To read more about The Pantry's foodservice plans, see related story in this issue of CSP Daily News.
Retail fuel gallons declined 4% overall in the second quarter and 6.9% on a comparable store basis. Fuel revenues in the second quarter increased 16.2% to $1.5 billion primarily as a result of the 21% increase in the average retail price per gallon to $3.24 from $2.69 in the second quarter of the prior year. Fuel gross profit for the second quarter increased 22% from the first quarter of fiscal 2011 and decreased 5.4% compared to the same period a year ago.
Total store operating and general and administrative expenses in the second quarter were $156.2 million, which was $200,000 higher than the same period a year ago. This increase is the result of investments in category management, infrastructure and advertising to support strategic initiatives, partially offset by expense efficiencies at the store level.
The company said that it believes its liquidity position is sufficient to continue to execute its core strategic initiatives given the $107 million in cash on hand and approximately $116 million in available capacity under its revolving credit facilities as of March 31, 2011.
Based in Cary, N.C., The Pantry Inc. is the leading independently operated convenience-store chain in the southeastern United States and one of the largest independently operated convenience-store chains in the country. As of May 9, 2011, the company operated 1,659 stores in 13 states under select banners, including Kangaroo Express, its primary operating banner.
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