Giant Food Inc. posted another strong quarter yesterday, with its net income soaring 30.4 percent even as sales growth slowed.
Surpassing analysts' estimates, the chain of 166 supermarkets reported earning $23.2 million, or 39 cents per share, during the second quarter ended Aug. 10, compared with $17.8 million, or 30 cents per share, during the comparable period last year.
"Anytime you increase your bottom-line profit by 30 percent, you have an excellent" quarter, said David B. Sykes, Giant's senior vice president and chief financial officer. Sykes, 77, is retiring Friday after 41 years with Giant. "It's delightful for me to have a quarter like this to leave on," he said.
For the fiscal year ended Feb. 24, Giant said, net income increased 8.5 percent to $102.15 million, or $1.72 a share, compared with $94.16 million, or $1.59 a share, the previous year. For the first quarter this fiscal year, Giant reported that earnings rose 16.6 percent.
The company generated even greater earnings growth in the second quarter, despite a weak local economy and a rise in sales of only 2.1 percent, from $856.5 million last year to $874.4 million for the 12-week period in 1996. In lieu of a major sales increase, analysts said, the retailer increased profits by keeping expenses in line and improving gross margins, the difference between the cost of goods and their retail price.
"They seem to be going through a very good period, as far as their margins go," said analyst Kurt Funderburg of Ferris, Baker Watts Inc. But, he noted, "You can only do that for so long."
The formula has worked for Giant over the first half of the fiscal year: Net income increased 22.8 percent to $48.95 million, or 82 cents a share, for the 24 weeks, compared with $39.9 million, or 67 cents a share, over the year-ago period. First-half sales increased by 2.6 percent to $1.8 billion, compared with $1.7 billion in the corresponding period last year.
However, sales in stores open at least a year, a key industry barometer, were flat for the quarter, Sykes said.
The company intends to boost business with several promotions, while it continues its northern expansion into Delaware and New Jersey, where Giant has opened four stores in the past 12 months. Another five supermarkets are slated to open by the year's end, three in New Jersey and one each in Pennsylvania and Maryland.
Pub Date: 8/28/96