The Pantry Accelerates Lifestyle Merchandising Initiative

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The Pantry Accelerates Lifestyle Merchandising Initiative


CARY, N.C. -- Lifestyle merchandising -- The Pantry Inc.'s initiative to stock stores with items specifically aimed at particular demographics -- is performing well enough that the convenience store chain will "accelerate the rollout," President and CEO Dennis Hatchell said during the company's 2013 first-quarter earnings call today.

Specifically, The Pantry now offers products aimed at Hispanic, college and beach audiences at several of its Kangaroo Express stores.

The chief executive did not want to offer many more details about the lifestyle merchandising program because he feels "it is a competitive advantage for us." However, Hatchell did note during the conference call that rolling out the concept to many more stores means the idea has worked.

Hispanic offerings -- primarily consisting of ethnic foods and beverages -- are currently available at least in part at 130 Kangaroo Express locations, with plans to add the concept to 56 more stores. Specific numbers were not provided on how many stores offer the college and beach products, the latter of which includes items as varied as surfboards and sunglasses in addition to traditional beach favorites such as packaged and malt beverages.

Along with the initial success of the lifestyle merchandising program, Hatchell also relayed that The Pantry enjoyed "exceptionally strong results in foodservice" in its latest quarter, which helped counteract the "challenging" cigarette environment. When asked by an analyst why cigarette sales continue to decline at c-stores, Hatchell said price increases have affected sales and retailers are still trying to figure out which tobacco promotions work best for their stores.

Other than cigarettes, fuel sales was another area of weakness during the first quarter. The company's fuel gross profit declined to $49.2 million vs. $55.9 million in its 2012 first quarter. Retail fuel margin per gallon slipped to 11.4 cents, compared to 12.2 cents for the same timeframe last year.

To help counteract decreasing fuel profits, Hatchell reported that The Pantry’s network of c-stores is implementing price management software from KSS Fuels. According to Berry Eppley, The Pantry's vice president and controller, the KSS Fuels pricing system will be utilized at all Kangaroo Express locations by the end of March.

Overall, The Pantry lost $3.1 million during its 2013 fiscal first quarter, which ended on Dec. 27. That compares to a net loss of $2.9 million during the same period in its fiscal 2012. Merchandise sales rose slightly to $428.8 million, while merchandise gross margin rose 1.1 percent to 34.3 percent.

Comparable store merchandise revenue increased 2.2 percent. Excluding cigarettes, comparable store merchandise revenues increased 4.8 percent.

Hatchell concluded today’s earnings call by welcoming B. Clyde Preslar, who will join The Pantry as its chief financial officer on Feb. 7. "Clyde's 15 years of experience as a public company CFO and his work in the consumer goods space make him a great fit for The Pantry and we are convinced that he will make significant contributions to The Pantry realizing its strategic initiatives.

At the end of the first quarter, Cary, N.C.-based The Pantry operated 1,572 stores, compared to 1,624 stores a year earlier. Looking ahead, The Pantry expects to open five new Kangaroo Express stores in its 2013 fiscal year, remodel 70 to 80 locations and add 20 to 25 quick-service restaurants.