SANFORD, N.C. -- Even as leaders at The Pantry shared the good news that the company's earnings per share for fiscal 2008 would exceed the previous year, they set a dour tone for the year and are proceeding with caution into 2009. "Fiscal year 2008 was one of the more difficult years we've had. Paradoxically, we announced that we beat the $1.17 [per share] that was forecast," president and CEO Peter Sodini told attendees of the Wachovia Consumer Growth Conference yesterday.
"I know the economic forecasts for FY '09 are rather dire and gloomy, with people looking for tremendous softness [image-nocss] in the economy," Sodini added. "From our perspective, we can't envision a worse energy component than we had to deal with last year. So we are happy where we are for '08. We look forward to '09 with some concern, but nonetheless we think we've been through some very tough times in fiscal '08."
Sodini spoke to the Wachovia bankers just hours after the company announced that for its fiscal year 2008, The Pantry's merchandise and retail gasoline sales are expected to be approximately $1.64 billion and 2.1 billion gallons, respectively. The merchandise gross-profit margin is expected to be below the previously announced guidance range of 36.8% to 37%, due to higher than expected LIFO charges.
The retail gasoline margin is expected to be near the top end of the previously announced guidance range of 10 to 12 cents per gallon. And the company expects that fiscal 2008 store operating and general and administrative expenses will be slightly above the high end of the previously announced range of $605 million to $610 million.
But the tough economic and gasoline-price climates that made The Pantry's fiscal 2008, which ended Sept. 25, difficult were further exacerbated by the dual blows of Hurricanes Gustav and Ike, which created two weeks of gas shortages in the Southeast just as The Pantry's fourth quarter wound down.
"We saw conditions we would never accept nor had even contemplated," Sodini said. "In Charlotte, N.C., and Chattanooga, Miss.—both major markets for us—we had stores out [of gasoline] as long as two and three days. That situation has been corrected over time; there are still shortages of premium and diesel."
Creating a larger issue were the headlines that announced gasoline prices were finally beginning to drop nationwide. "So the consumer is hearing that gasoline costs are coming down," Sodini said. "But when we don't have gasoline in the market, you've got to believe that we don't price too aggressively because you'd essentially be in business four or five hours and you'll be out [of gasoline]."
Sodini noted that the issue was "an aberration" but compared it to memorable hurricane season of three years ago. "It was probably analogous to 2005 with Rita, Katrina, but it was worse."
Based in Sanford, N.C., The Pantry 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, with revenues for fiscal 2007 of approximately $6.9 billion. As of Sept. 25, 2008, the company operated 1,653 stores in 11 states under select banners, including Kangaroo Express, its primary operating banner.
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