Giant lets profit slip but keeps sales volume

November 20, 1991|By Ellen James Martin

Giant Food Inc. took a heavy earnings hit in the third quarter after reducing its gross margins to meet tough competition and the recession-era price concerns of consumers, David B. Sykes, senior vice president for finance, said yesterday.

"Food is not immune to recession. We find that our customers are buying one item fewer per trip than they were buying a year or a year and a half ago," Mr. Sykes said.

For the quarter that ended Nov. 2, Giant's net income declined nearly 43 percent. But Mr. Sykes said that the company retained its volume and customer base despite heavy competition. Sales for the quarter rose 2.15 percent over the same quarter a year ago.

Analysts say the supermarket discount chain that has given Giant its toughest competition is Shoppers Food Warehouse, which has advanced strongly on the Washington market. "They're good competitors," Mr. Sykes acknowledged.

A securities analyst who tracks Giant, H. B. Thomson III of Wheat First Securities in Richmond, Va., said Giant is willing to take lower gross margins to preserve its volume during difficult times.

"They've kept sales up by sacrificing gross margins," Mr. Thomson said. "Everybody is having to give the consumer a deal to keep him coming in and spending money."

During recessionary periods, consumers often "trade down" in their grocery shopping -- avoiding gourmet specialty foods and impulse items, Mr. Thomson said. These are the products that typically carry the highest gross margins, he said.

12 weeks ended 11/02/91

.. .. .. Revenue.. .. .. Net.. .. .. Share

'91... 773,843,000.. 14,201,000.. ...24

'90... 757,589,000.. 24,901,000.. ...42

% change.. .. +2.15.. .. ..-42.97...-42.85

36 weeks ended 11/02/91

.. .. .. Revenue.. .. .. Net.. .. .. Share

'91.. 2,338,111,000.. 62,521,000.. 1.05

'90.. 2,290,852,000.. 79,166,000.. 1.33

% change.. .. +2.06.. .. ...-21.0... .-21.05

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