Strong Quarter for The Pantry

The Pantry Inc., operator of 1,644 stores in 11 states under brands such as The Pantry and Kangaroo Express, reported sharp gain in first quarter revenues. For the quarter, revenues jumped to approximately $2 billion, a 43.2% increase from the first quarter of fiscal 2007. Net income was $3.2 million compared to just $125,000 a year ago. EBITDA for the quarter was $53.6 million, up 51.6% from $35.3 million a year ago.

"Our favorable earnings comparison for the first quarter primarily reflects an improvement in retail gasoline margins from unusually depressed levels a year ago," said Pete Sodini, chairman and CEO of the Sanford, N.C.-based chain. "In our merchandise business, we again achieved double-digit percentage growth in both total revenues and gross profits, mainly due to acquisitions and new store openings. Expenses were well-contained and below our expectations, reflecting the benefits of our recent restructuring program as well as additional efficiency gains across our store operations."

Merchandise revenues for the first quarter were up 13.2% overall and 0.8% on a comparable store basis. The merchandise gross margin was 37.0%, compared with 37.6% in the corresponding period last year. Total merchandise gross profits for the quarter were $146.4 million, an 11.5% increase from a year ago.

Retail gasoline gallons sold in the quarter increased 14.3% overall, but declined 2.8% on a comparable store basis. Retail gasoline revenues rose 50.7%. The average retail price per gallon was $2.92, up sharply from $2.21 during the first quarter of fiscal 2007. The retail gross margin per gallon was 10.6 cents, compared with 8.7 cents a year ago. Gasoline gross profits for the quarter totaled $56.2 million, up 39.6% from $40.2 million in last year’s first quarter.

Also during the quarter, The Pantry acquired three convenience stores and opened four new large-format stores during the quarter and closed six underperforming stores.

For fiscal year 2008, The Pantry expects merchandise sales and gasoline gallons to be below its previous expectations due to the recent softening of consumer spending in its market areas. The company expects comparable store merchandise sales in fiscal 2008 may be relatively flat to slightly down, with total merchandise sales between $1.6 billion and $1.7 billion. Comparable store gasoline gallons sold are expected to be down slightly with total retail gasoline volume for fiscal 2008 of between 2.1 billion to 2.2 billion gallons.

In terms of margins, The Pantry continues to expect a merchandise gross profit margin of approximately 37% and retail gasoline margins between 11 and 13 cents per gallon for the full year. These expectations do not account for the potential effect of possible acquisitions during the remainder of the fiscal year.

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