Giant Food's earnings rise 34% for quarter Higher margins, lower costs credited

may be last independent report

June 10, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

In what could be its last financial report as an independent company, Giant Food Inc. said yesterday that higher profit margins and lower costs boosted first-quarter profits by 34 percent.

For the 12-week period that ended May 23, Landover-based Giant reported net income of $19.9 million, up from $14.9 million in the year-ago period. Earnings per share increased 32 percent, from 25 cents to 33 cents.

"They were just slightly ahead of our expectations," said Kurt Funderburg, a Baltimore-based analyst for Ferris Baker Watts. "What surprised me the most was that almost everything worked the way it was supposed to work this quarter."

Giant said sales jumped 5.89 percent, to $983.7 million from $928.9 million. The company's gross profit margins increased to 29 percent from 28.5 percent in the year-ago quarter. Giant's net profit margin rose to more than 2 percent of sales, up from the year-ago figure of 1.6 percent.

Giant's $2.7 billion sale to Netherlands-based Royal Ahold N.V., announced last month, is scheduled to become final later this summer. Whether Giant reports second-quarter results independently depends on the speed of federal regulators.

Funderburg said Giant's first-quarter numbers are particularly impressive because the company has been cutting prices and running promotions to lure consumers. "They've apparently found ways to buy more efficiently," he said.

Mark Berey, Giant's chief financial officer, said: "Our results are really a combination of building sales, improving gross profit margins and lowering our operating expenses. When you make progress in all three at the same time, you get a bottom-line benefit."

Giant, which had 178 stores in the first quarter compared to 175 a year earlier, also said stores in operation during both years saw sales increase by 2.2 percent -- up from less than 1 percent a year earlier.

"With a very low food-inflation rate, most chains would be pleased to exceed 2 percent same-store sales growth right now," Berey said. Giant shares, which fell 18.75 cents to close at $43, were likely not affected by yesterday's earnings report. Funderburg said investors are focused on Giant's pending sale to Ahold.

Pub Date: 6/10/98

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