The Pantry Cutting Costs in 2008

The Pantry Inc., of Sanford, N.C., is positioning itself to cut capital expenditures and put a halt to purchases for the rest of the year after posting a loss in the second fiscal quarter, though the company’s shares jumped after posting better-than-expected sales, the Triangle Business Journal reported.

The announcement came about a month after The Pantry warned investors it would lose money in the second quarter. Lower margins on gasoline sales, the economic slowdown and a 23-cent-per-share hit on failed gasoline hedges led the company into the red.

The Pantry said it plans to take additional steps to cut spending and hopes to put its capital expenditures at $90 million (from $110 million) for the rest of the fiscal year. The Pantry has grown by purchasing small convenience-store chains throughout the Southeast, but it said it would suspend acquisition activity through next January, the Triangle Business Journal reported.

The Pantry also said it has no plans to buy back any of its stock. The company has more than $28 million remaining under a previous buyback authorization, according to securities documents. In a statement, Pantry CEO Pete Sodini said the company would rather focus on improving free cash flow, which is business lingo for the money left over after a company pays all of its expenses.

The Pantry also has exited all of its positions in gasoline hedging, though it will take another after-tax charge of 4 cents per share in its fiscal third quarter.

“Clearly our gasoline hedging program did not perform as we had expected,” Sodini said in a statement.

Revenue in the quarter was $2.04 billion, topping the average expectations of analysts polled by Reuters, who expected $1.97 billion. The Pantry has about 1,600 c-stores in 11 states.


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