The Pantry Completes Fuel Pricing System Rollout

CARY, N.C. – The Pantry Inc., operator of more than 1,500 Kangaroo Express convenience stores in the Southeast, achieved its scheduled goal of rolling out a new fuel pricing system during the second quarter of fiscal 2013, President and CEO Dennis Hatchell reported during the company's Q1 earnings call today. The new system, first announced in December, allows for rapid response to changing market conditions and guides pricing decisions to balance gallons and gross profit.

The company's fuel sales also benefited from a decline in fuel costs, resulting in higher margins than expected.

Going into the second half of fiscal 2013, Hatchell said The Pantry will continue to put its efforts behind its lifestyle merchandising program, which aims to stock shelves with products specifically chosen for local demographics. The initiative is "gaining momentum," he said, adding that the company is pleased with its progress thus far and plans to continue localizing store offerings where possible.

The retailer also continues to expand its facilities, completing six remodels during its 2013 second quarter and 17 remodels in April and early May. Fifteen remodels, six quick-service restaurants (QSRs), three new stores and one rebuild are currently in progress. The Pantry also opened a new Kangaroo Express prototype store in Charlotte, N.C., in March.

The company is "very excited" by the early results of the location, said Senior Vice President and Chief Financial Officer B. Clyde Preslar. The Charlotte store offers a drive-thru, indoor and outdoor seating, a Redbox self-service movie kiosk and the first frozen yogurt program available at the chain.

The prototype store "gives QSR the kind of presence that it needs to compete well in the marketplace," Preslar noted.

As part of its QSR strategy, The Pantry is currently testing two Taco Del Mar restaurants. Additionally on the foodservice side, its third annual RooCup has launched to an enthusiastic start. The seasonal cup, which can be refilled now through Labor Day for just 25 cents and was able to be pre-reserved by customers for the first time this year, is intended to leverage customer enthusiasm to drive additional traffic and sales during the peak spring and summer driving season.

Sustained colder-than-average temperatures in February and March, along with unusually significant winter storms, resulted in a "very interesting and challenging" second quarter for The Pantry, according to Hatchell, and contributed to a 4.6-percent decline in same-store traffic compared to one year ago.

Beer, packaged beverage and QSR sales were especially affected. Comparable store merchandise revenue declined 2 percent, but increased 0.1 percent excluding cigarettes. Fuel sales also suffered from the drop in traffic, with gallons sold decreasing 7.9 percent compared to the year ago. The company's Florida stores saw the strongest results during the quarter due to the better weather conditions.

Overall, The Pantry saw a net loss of $6.9 million during the 2013 second quarter, compared to a net loss of $9.7 million in last year’s Q2.

"We were encouraged by the 2.6-percent improvement in average sales per customer, but disappointed that this was more than offset by a 4.6-percent decline in traffic inside our stores," Hatchell stated. "We believe that our merchandising initiatives are having a positive impact and are confident they will drive stronger overall performance when customer traffic levels improve."