Giant has first sales drop in decades Volume falls short of '91 2nd quarter

September 02, 1992|By Michael Dresser | Michael Dresser,Staff Writer

For the first time in decades, Giant Food Inc. reported a quarter of declining sales yesterday as food-price deflation and shrinking family budgets chewed away at its once-lordly profits.

The Landover-based grocery-store chain, which dominates the Baltimore-Washington market, could not buck the recessionary tide that swamped the industry in the second quarter.

Giant's earnings fell 37.3 percent from the same quarter last year, skidding to $12 million, from $19.1 million. Its earnings per share of 21 cents, compared with 31 cents last year, was below analysts' expectations.

The sales decline was tiny -- 0.23 percent -- but it was striking. This, after all, is Giant, where growth has come to be expected. Giant's sales fell, from $780.4 million to $778.6 million, despite the opening of a new store in Columbia and the addition of a pharmacy to its store in Springfield, Va.

Comparable-store sales were down 1.68 percent. Gross margins fell from 2.44 percent of revenue to 1.54 percent.

David Sykes, Giant's senior vice president for finance, said the year-to-year sales decrease was the first he could recall in more than three decades with the company. "The economy is poor," he said. "The recession is still here in Washington and there in Baltimore. Competition continues to be fierce."

Mr. Sykes noted that the second-quarter percentage drop in earnings was virtually identical to the one Giant recorded for the first quarter.

Kenneth M. Gassman Jr., an analyst with Davenport & Co. in Richmond, Va., said Giant's sales were hurt by a combination of lower food prices, strong competition from Shopper's Food Warehouse and restraint by consumers.

"You've got customers buying less-expensive cuts of meat," he said. "You have people who have just said they are going to shop where it's less expensive."

Mr. Gassman said Giant's earnings were expected to be down, but "the surprise was that the earnings decline was as sharp as it was."

Guy W. Ford, vice president of Scott & Stringfellow in Richmond, said Giant's problems were part of an industry pattern. Safeway, he noted, recently announced that it expected second-quarter results to be about 50 percent below last year's. A&P had reported a loss.

Like Mr. Gassman, Mr. Ford pointed to increased frugality by the consumer. Giant's customer counts are holding up well, he said, but they aren't spending as much at the checkout counter.

Mr. Ford added that Giant has been cutting prices aggressively to defend its market share against the encroachments of warehouse clubs. In the short term, that cuts into Giant's margins and earnings. But Mr. Ford is bullish about the company's long-term prospects.

"They're in great financial shape," he said. "They have a commanding market share."

The earnings report was released after the stock market closed.

Twelve weeks ended 8/15/92

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

'92.. .. .. 778,586,000.. .. .11,959,000.. .. .. 0.20

'91.. .. ..780,392,000.. .. .19,070,000.. .. .. 0.31

% change.. .. .-0.2.. .. .. .. .-37.3.. .. .. ...-35.5

Twenty-four weeks ended 8/15/92

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

'92.. .. .. 1,581,606,000.. ..31,060,000.. .. .. .0.52

'91.. .. ..1,564,268,000.. ..48,320,000.. .. .. .0.81

% change.. .. .+1.1.. .. .. .. .-35.7.. .. .. .. .-35.8

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