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    Pantry’s Foodservice Ops Firing on All Cylinders

    Category helps Kangaroo Express parent’s earnings more than double.

    By Brian Berk, Convenience Store News

    CARY, N.C. – The Pantry Inc. has placed a major emphasis on improving in-store merchandise sales thus far this year and its efforts have paid off handsomely, President and CEO Dennis Hatchell said during Wednesday’s 2014 fiscal third-quarter earnings call.

    The parent of Kangaroo Express enjoyed a 2.3-percent increase in in-store merchandise sales in its latest quarter, primarily due to strong foodservice operations. “Our sales per customer were very good in the latest quarter. We had some very successful Roo programs and also had sales contests that [got] our team members excited,” Hatchell reported, noting that the contests will continue moving forward.

    Quick-service restaurant (QSR) sales were also especially strong, rising 7.7 percent in the quarter ended June 26, compared to the same period a year ago. The Pantry had a total of 225 QSRs at the end of its fiscal third quarter and expects to add another 20 QSRs by the end of its 2014 fiscal year. The company's goal for fiscal year 2015 is to add 35 more quick-service restaurants.

    “Foodservice [sales] are strong,” said Hatchell. “[But] we are targeting even better in-store [merchandise sales] results." 

    Foodservice operations were the main driver leading The Pantry’s net earnings to more than double in its most recent quarter. The convenience store operator earned a net profit of $14 million, vs. a $5.9-million profit during its 2013 fiscal third quarter.

    Unlike in previous quarters, retail fuel sales provided a positive impact on earnings. Although retail fuel gallons sold in the third quarter declined 2.3 percent, margins rose to 12.9 cents per gallon because the average price per gallon was $3.59, compared to $3.45 in the year-ago period. This led total fuel gross profit to rise more than $1 million to $54.9 million for the most recent quarter.


    Cary-based The Pantry had 1,527 convenience stores as of June 26, vs. 1,567 as of June 27, 2013. The retailer continues to close underperforming stores. It closed seven such stores in its latest quarter and 22 thus far in fiscal 2014. The Pantry’s goal is to close 30 stores by the end of its 2014 fiscal year.

    In the meantime, the chain will focus on rebuilding current stores, as well as opening some new ones. Hatchell pointed out that its recently opened military-themed c-store in Fayetteville, N.C., has been performing extremely well so far.

    Acquisitions are not currently in The Pantry’s plans. “We would only make small acquisitions of one or a few stores to strengthen a market [we are currently already in],” the chief executive noted during Wednesday’s earnings call. “We will otherwise focus on strengthening current stores and rebuilds.”

    Wall Street reacted quite favorably to The Pantry’s earnings report. On Wednesday morning, The Pantry’s NASDAQ-traded stock traded nearly 17 percent higher than the previous day.

    By Brian Berk, Convenience Store News
    • About Brian Berk Brian Berk is managing editor of Stagnito Business Information's Convenience Store News and Convenience Store News for the Single Store Owner, where he specializes in covering motor fuels, technology and financial news. He has served the magazine industry for 14 years and has also worked in the radio and newspaper fields. Berk holds a bachelor's degree in communications from the State University of New York at Cortland and a master's degree in journalism from Quinnipiac University in Hamden, Conn.

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