The Pantry Lowers Fiscal Expectations

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The Pantry Lowers Fiscal Expectations

SANFORD, N.C. -- The Pantry Inc., operator of 1,645 convenience stores in the Southeast, disclosed that it expects gasoline gross margins and earnings per share to be below the previous targets for the fiscal year ending Sept. 27, the company stated.

The Pantry, which based its assessment on preliminary data, anticipates its retail gasoline gross margin for the fourth fiscal quarter to range from $0.10 and $0.105 cents per gallon, which would bring its fiscal year retail gasoline margin to approximately $0.109 cents per gallon, substantially below the expected $0.115 cents per gallon, according to the company.

As a result, The Pantry expects its earnings per share for the fourth quarter and fiscal year to be below previous expectations, the company stated.

"Our merchandise business turned in a solid fourth quarter, with comparable sales above targeted levels and merchandise gross margins improved from the third quarter. However, we have not seen the seasonal improvement in gasoline gross margins that we have usually experienced after Labor Day," chairman and chief executive officer Peter J. Sodini said in a statement. "To the contrary, our gas margins have declined this month, reflecting increased oil and gasoline prices, tight supplies and scattered refinery shutdowns."

The Pantry also announced a company restructuring to reduce operating, general and administrative expenses by at least $6 million in fiscal 2008, the company stated.

"While we certainly regret the human impact of our restructuring program, we realized we had to be more proactive in the current challenging environment to ensure that we can deliver the leverage we need on our operating, general and administrative expenses," said Sodini.

As part of the effort, the company expects to see a one-time charge in the fourth quarter of fiscal 2007, the company stated.

The company also repurchased about 693,000 shares during the fourth quarter, in accordance with its previously announced share repurchase plan.

In addition, The Pantry provided an outlook for fiscal 2008. Due to current oil prices and volatile gas margins, the chain is widening its target range for retail gasoline margins to between $0.11 and $0.13 cents per gallon in fiscal 2008. The company also expects merchandise sales to grow about 10 percent to approximately $1.7 billion, and retail gasoline gallons to grow about 11 percent to approximately 2.3 billion gallons, excluding potential acquisitions, the company stated.