The Pantry Completes Strategic Market Review

CARY, N.C. -- The Pantry Inc. completed a strategic market review and will consider acquisitions in what the company deems “high priority” markets, President and CEO Dennis G. Hatchell said during today's 2013 fiscal fourth-quarter earnings call.

For competitive reasons, Hatchell said he would not disclose which regions are the best performers within its 13-state operating region. However, he did note that the operator of Kangaroo Express convenience stores will not venture into any new states.

"We won't go crazy acquiring [stores] across the country," the chief executive said on the conference call. "We will be looking to round out current markets."

In the meantime, The Pantry continued to open large-format stores and close underperforming locations in its latest quarter, which ended Sept. 26. Two large-format stores opened in the fourth quarter and three opened for the entire 2013 fiscal year. These stores are located in Charlotte, N.C., Myrtle Beach, S.C., and Ocala, Fla.

"We are pleased with the new store performance," noted Hatchell. "All three are top 20-percent performers."

Eighteen underperforming stores were closed in the latest quarter. The Pantry now has 1,548 company-operated locations, as well as 222 quick-service restaurants. The company expects to open up to four new stores in fiscal 2014, Hatchell stated.

Remodels were also a big part of the Cary, N.C.-based company's fourth quarter. Thirty-one locations were remodeled, and the chief exec said he is pleased with the progress thus far.

As for earnings, The Pantry eked out a $1-million profit in the quarter, a significant advancement compared to a $4.8-million loss suffered in the year-ago period. The earnings improvement was led by comparable-store merchandise revenues, which rose 2 percent.

Broken down further, proprietary foodservice was clearly The Pantry's biggest winner in its latest quarter. This category improved 8.6 percent.

"We achieved improved operating results during the fourth quarter and are gaining momentum in merchandise sales as we move into fiscal 2014," Hatchell said. "Our sales initiatives generated comparable-store merchandise growth of 2 percent and merchandise sales per customer continued to grow."

As for why same-store merchandise sales are rising, The Pantry is making sure the right products are on the proper shelves; offering items specifically intended for the locale; and introducing healthier items, the CEO relayed.

"We are working very hard to increase sales per customer," said Hatchell. "We feel like we are gaining momentum."

Fuel sales, meanwhile, offered a mixed bag. Gallons sold declined by 13 million to 441 million gallons. However, fuel margins rose to 10.5 cents per gallon vs. 9.5 cents in the year-ago period.