Giant Food Inc., the top dog in the Baltimore-Washington grocery business, absorbed a big bite out of fourth-quarter earnings, but apparently neither recession nor aggressive competitors could loosen its grip on market share.
The Landover-based grocery store chain reported yesterday that earnings dropped 38 percent, to $24.7 million, or 42 cents a share, from $39.7 million, or 68 cents a share, during last year's fourth quarter, which ended Feb. 23.
Quarterly sales were up 8.8 percent, although that figure was closer to 3 percent when adjusted to reflect the extra week in the quarter this year. On an adjusted basis, sales at stores that were open a year ago were up 0.4 percent.
"I think we've done very well holding on to customers and sales," said David Sykes, Giant's senior vice president for finance. He pointed out that the gains were achieved despite lower prices for many items.
The earnings decline was largely the result of lower gross margins. Net income as a percentage of sales, 3.75 percent for the fourth quarter of fiscal 1991, plunged to 2.14 percent during the most recent quarter.
Jeff Metzger, publisher of the regional trade newspaper Food World, said the 2.14 percent figure was "very good by industry standards," even though it was anemic when measured against Giant's past performance. He said quarterly earnings were "actually pretty good" considering economic conditions and the increased competition Giant faces.
For the full 1992 fiscal year, Giant's earnings were off 26.7 percent, dipping to $87.2 million, or $1.47 a share, from $118.9 million, or $2.01 a share, the year before. Year-to-year sales were were up 2.2 percent after the extra week of fiscal 1992 was subtracted, and sales at stores open at least a year were up 0.2 percent.
Over the past year, the 262-store Giant chain has moved aggressively to protect its turf against low-priced competitors. Last July, it cut prices on thousands of health and beauty products and extended its double-coupon program to Washington. The company has also moved to counter warehouse clubs by expanding its SuperDeals bulk-purchase program.
The moves cut deeply into Giant's gross margins, but they demonstrated that Giant would not give up any of its market share without a fierce fight.
According to a survey published by Columbia-based Food World last June, Giant held about 29 percent of the grocery market in the Baltimore area last year, while its closest competitor mustered a 7.3 percent share. Giant's share of the combined Baltimore-Washington market was almost 40 percent.
Guy W. Ford, vice president of Scott & Stringfellow in Richmond, Va., said he expects Giant's earnings to remain flat for several quarters because of heavy competition.
"Most people think of it as recession-proof, but it's been awfully tough," he said, pointing to deflation of grocery prices even as personnel costs rise.
17 weeks ended 2/23/92*
.. .. .. ..Revenue .. .. ..Net Share
'92 1,151,651,000 24,659,000 0.42
'91 1,058,694,000 39,725,000 0.68
% change .. ..+8.8 .. .. -37.9 -38.2
53 weeks ended 2/23/92**
.. .. ... .Revenue .. .. .. Net Share
'92 3,489,762,000 .87,180,000 1.47
'91 3,349,546,000 118,891,000 2.01
% change .. ..+4.2 .. .. .-26.7 -26.9
* 1991 fourth quarter had 16 weeks
** Fiscal 1991 had 52 weeks