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The Pantry and Couche-Tard Report Hurricane Effects

SANFORD, N.C. -- Hurricane Katrina destroyed three convenience stores owned by The Pantry Inc. and left a fourth severely damaged, the company reported.

“We're trying to cope with what has been a very unique situation,” president and CEO of the Sanford, N.C.-based chain, Peter J. Sodini, said during a conference call Thursday, nearly two weeks since the storm devastated the U.S. Gulf Coast region.

“We are in a day-by-day situation,” Sodini added.

At the peak of the hurricane, The Pantry closed 47 of its 114 stores across Louisiana, Mississippi and Alabama -- the hardest-hit states. Eight remain closed pending damage repair. The three stores that were destroyed will be rebuilt.

Overall, Sodini classified the hurricane's financial impact for the chain as “minimal.”

All of the company's stores are insured against losses from property damage and business interruption and only subject to a deductible, which is estimated at less than $1 million. In the fourth quarter of 2004, The Pantry incurred uninsured losses totaling roughly $4 million from four hurricanes, company officials said.

Merchandise sales also remain strong, Sodini said, adding that he thinks the company can sustain them despite soaring gas prices. In areas impacted by the storm, he said, “consumers are buying anything in the store that's edible, drinkable.”

The company still expects its 2005 earnings to be between $2.10 and $2.15 per share.

For The Pantry, the most significant impact from the hurricane has been depleted fuel supply, but Sodini said its diversified supply is playing to its advantage.

“Overall, we think we've done a good job keeping our stores supplied with gas,” he said, though there have been periods when none was available. “Given our experience over the last two weeks, we believe we will continue to be well-positioned.”

Sodini is optimistic that the situation will improve.

“We intend to continue managing through this situation,” he said. “And hope in the near term to get back to more normalized business.”

Meanwhile, Alimentation Couche-Tard Inc. is still trying to locate about 200 employees of its c-stores in Louisiana, Mississippi and Alabama, Canadian Business reported.

Despite heavy damage to its stores, the Laval, Quebec-based chain doesn't expect the catastrophe will hurt its sales for the current year, CEO Alain Bouchard said.

Bouchard said 120 of its Circle K stores in the southern states were damaged and about 30 remain closed -- of which 11 were destroyed and will have to be rebuilt.

Couche-Tard will continue to pay the salaries of all its personnel and promised to find work in the company for those who temporarily lost their jobs due to the floods and hurricane, he said.

"For us, it's more a question of a human tragedy," said Real Plourde, chief operating officer. "Out of 233 employees in New Orleans, we have been able to contact only 30. They are spread around seven states. In the coming months, our main job will be to look after our people."

All of Couche-Tard's assets are insured, he said of the company, which operates some 4,845 convenience stores in North America.

While it won't cost the company to rebuild its stores, it's a different story for the lost sales, particularly for gasoline, said Richard Fortin, chief financial officer. But still he expects a minimal impact.

"Our past experience shows that the impact of this type of event for us is generally negligible," Fortin said.

For example, last year's four major hurricanes in Florida cost Couche-Tard $3.8 million in pre-tax profits, out of a total $1.2 billion for the year ending last April 24.

Plourde said the loss of sales in one closed store is usually made up for by an increase in nearby stores that remain open.

Sales at convenience stores in Baton Rouge, an hour from New Orleans, have doubled, he said, and security guards had to be hired to maintain order at some of them.

Some Circle K gas locations have run out of gas. U.S. authorities are promising the situation should soon be stabilized, Bouchard said, while pump prices will likely remain high.
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