Harris Teeter sees strong private label growth in Q1

Harris Teeter has announced financial results for the first quarter. Sales rose 3.6% to USD928.9 million during Q1. Comparable store sales, which declined 2.12%, were negatively impacted by the timing of the New Year’s holiday which will be included in Harris Teeter’s second quarter. The company estimates that the timing of the holiday accounted for about 0.76% of the comparable store sales decline. Harris Teeter also noted that comps were negatively affected by “changes in consumer buying habits created by the current economic environment”. The retailer realised a higher percentage of sales of its lower priced private label products and sales declines in more discretionary items such as floral and certain general merchandise. Operating profit rose 0.2% to USD44.3 million, or 4.77% of sales.

Thomas W Dickson, Chairman of the Board, President and Chief Executive Officer of parent company Ruddick Corporation said: “We, like everyone else, are facing unprecedented economic uncertainty, tumultuous market conditions, and a decreasing level of consumer confidence resulting in reduced consumer spending. We have continued to adjust our promotional spending in response to this change to encourage and drive customer loyalty and shopping visits. Even though our customers are purchasing fewer items per shopping visit, we experienced an average increase in active households of 0.28% per comparable store (based on our loyalty card data), evidence that we are growing our customer base in those stores. In addition, according to research data, we have increased our market share during the first quarter of fiscal 2009, in the aggregate for all of our markets. Although we are not pleased with our negative comparable store sales, our focus on store brands in our promotional activities has been well received by our customers and our store branded product penetration has increased approximately 23 basis points to 24.88%. At the same time, we improved our gross profit margin by 54 basis points and exceeded last year’s operating profit for the quarter. Our promotional activity has been effective in improving our comparable store sales trends over the past several weeks and we have realised some positive comparable store sales trends since the beginning of the second fiscal quarter."

Dickson added: "We continue to position Harris Teeter for long-term success while taking into consideration the current economic environment and its impact on our capital expenditure programme. We have reduced our fiscal 2009 capital expenditure plan by USD29 million to USD212 million and have revised our fiscal 2010 capital expenditures to approximately USD150 million, 29% less than fiscal 2009. To support our growing store base in Virginia, Maryland and Washington, DC, we have recently identified a site for a new distribution centre outside of Fredericksburg, VA. Pending satisfactory due diligence, we anticipate construction in fiscal years 2011 and 2012 with an opening sometime in fiscal 2012. The estimated cost for the facility and equipment is approximately USD100 million. The addition of this facility will result in significant transportation expense savings."

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