Giant's earnings balloon 146% in second quarter 'Very good' results posted weeks before likely sale


September 02, 1998|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Giant Food Inc., likely just weeks away from an acquisition by international food retailer Royal Ahold NV, saw its second-quarter profits more than double, the company said yesterday in what is expected to be its last independent financial report.

The Landover-based grocery chain reported net income of $18.8 million -- 1.95 percent of sales -- for the quarter ended Aug. 15, up 146 percent from $7.6 million, or 0.82 percent of sales, in the same period a year ago. Earnings per share rose 138 percent, to 31 cents per share, meeting analysts' expectations.

"They were a little bit better than I expected," said Kurt Funderburg, an analyst for Ferris Baker Watts in Baltimore. "Performance was strong across the board. Overall, this looks like a very good quarter for the company."

Sales rose to $963.6 million from $934.8 million, a 3.1 percent increase, the company reported. Though sales increased, the rate of growth slowed from the previous quarter, when sales had jumped 5.89 percent.

But earnings improved because the company had been able to rebuild its sales from a year ago, said Mark Berey, Giant's chief financial officer. During the previous year, Giant had run promotions to recapture customers and market share lost during a five-week Teamsters strike that was settled in January 1997.

"A year ago, they were discounting almost every item in the store to get people to come back to Giant and shop," Funderburg said. "Now they're able to be a little less promotional, to improve margins and be more profitable."

As margins have improved and sales gains have been retained, earnings have increased, the company said.

"Last year was extremely promotional in trying to rebuild and maintain our market share," Berey said. "I would describe us in a more normalized mode this year."

During the quarter, Giant opened a new Super G food and drug store in Pennsylvania and continued building two new stores, in Baltimore and Rehoboth, Del.

In announcing earnings yesterday, Giant said it expects Federal Trade Commission staff approval of its $2.7 billion sale to Royal Ahold within a few weeks. Ahold needs antitrust approval from the FTC to proceed with a sale that would make it the fifth-largest U.S. supermarket company.

The FTC will likely require Ahold to divest about 10 grocery stores in Maryland or Pennsylvania that are owned by Giant Food or Giant Food Stores Inc., a Carlisle, Pa.-based chain also owned by Ahold.

Pub Date: 9/02/98

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