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SANFORD, N.C. -- The Pantry Inc., operator of approximately 1,300 convenience stores in the southeast, reported fourth quarter store merchandise sales increased approximately 4.9 percent and comparable store gasoline gallon volume increased approximately 0.7 percent. It was the fifth consecutive quarterly increase in store volume for both business segments and the increase in comparable store merchandise sales represents the largest quarterly gain in the last nine quarters.
"Given current market conditions and recent events affecting the convenience store industry, we felt it prudent to provide our shareholders and other stakeholders with an update on our fourth quarter performance," said Pete Sodini, The Pantry's president and chief executive.
Based on preliminary information, Sanford, N.C.-based chain expects fourth quarter earnings per share to be in the range of approximately $.05 to $.08, compared to a loss per share of $.18 in the fourth quarter last year. Fourth quarter EBITDA is expected to be in the range of approximately $28 to $29 million, compared to $30.4 million in the fourth quarter of 2001.
Other preliminary fourth quarter financial highlights include expected growth in merchandise gross profit of approximately six percent driven by increased volume and a higher merchandise margin of approximately 33.3 percent. Gasoline margin is expected to be approximately 10.1 cents per gallon compared to a margin of 11.9 cents per gallon in the fourth quarter a year ago.
"Though we continue to be affected by wholesale gasoline volatility and general economic conditions, I am particularly pleased that during the fourth quarter we partially offset the impact of a decline in our gas margin with improved comparable store volume, higher merchandise gross profit and strong expense controls," Sodini said. "In early January, we aggressively refocused our marketing efforts and strengthened our promotional calendar. As a result and based upon preliminary information, the merchandise segment of our business continues to perform well with both fourth quarter comparable store sales and merchandise margin exceeding our previous guidance."
In connection with these marketing initiatives, the company, which operates under brands including The Pantry, Handy Way, Lil' Champ Food Store, Quick Stop and Big K, has been working closely with its vendor partners to simultaneously grow merchandise revenue and gross profit dollars. The chain has remerchandised approximately 500 stores and now expects to complete the project in April 2003, two months ahead of schedule.
With regard to its largest supplier, The Pantry announced it has renegotiated its wholesale agreement with McLane Co. Inc., including a three-year extension, and the chain believes these amendments should reduce related product costs and improve merchandise offerings. "McLane has been an excellent wholesale partner providing valuable marketing support while maintaining high service standards," Sodini said.
Also during fiscal year 2002, The Pantry reduced debt by approximately $40 million. As of Sept. 26, The Pantry had no outstanding borrowings under its revolving credit facility, a cash balance of approximately $40 million and is in full compliance with all financial covenants under its credit facility.
"We are pleased with the continuing progress we have made in improving comparable store volume, merchandise gross profit and our overall cost structure," Sodini said. "In fiscal 2003, we will continue to focus on these and other areas and as a result, we feel the company is well positioned to report full year fiscal 2003 earnings per share results that will compare favorably to full year fiscal 2002 estimated results."