The Pantry Substantially Exceeds' Projected Growth

Per-share earnings 45 cents over expectations

SANFORD, N.C. -- The Pantry Inc. convenience store chain expects its fiscal 2005 earnings per share to substantially exceed its previous guidance.

Based on preliminary, unaudited data, the Sanford, N.C.-based company expects to report diluted earnings per share for its fiscal year ended September 29, 2005, in a range between $2.55 and $2.60, including charges of approximately $0.22 per share related to store closings, impairment charges and uninsured losses associated with Hurricane Katrina. That is compared with the previous guidance range of $2.10 [image-nocss] to $2.15.

Diluted earnings per share for fiscal 2004, excluding a number of financing-related charges, were $1.54. Comparable store merchandise sales and gasoline gallons sold for fiscal 2005 increased 5.3% and 4.7%, respectively.

"These excellent preliminary annual results reflect the success of our strategies implemented over the past few years to better diversify and secure our gasoline supply, rebrand and reimage our stores, and enhance our merchandising offerings with private label and expanded food services, said president and CEO Peter Sodini. In addition, our fourth fiscal quarter benefited from the acquisitions we completed in the latter half of the year and an exceptionally strong contribution from our gasoline segment in a very volatile market. These benefits were partially offset by charges related to our decision to close 19 underperforming stores."

Sodini added that for fiscal 2006, assuming that gasoline margins approximate about 12.5 cents per gallon, he expects earnings per share in a range between $2.55 and $2.65.

On the plus side, we are looking forward to continued growth in our merchandise business and achieving the expected accretion from acquisitions completed in 2005, he said. However, a number of financial items, including expensing stock options for the first time, an increase in shares outstanding and a higher tax rate, will also affect our reported results by a total of 15 to 20 cents per share in fiscal 2006."

The Pantry is one of the largest independently operated convenience store chains in the country, with net sales for fiscal 2005 of approximately $4.4 billion. As of September 29, 2005, the company operated 1,400 stores in eleven states under a number of banners, including Kangaroo Express, Cowboys and Golden Gallon.