“It will take longer than originally anticipated to realize the benefit of the marketing, merchandising and operational initiatives that we continue to build upon. Accordingly, we are adjusting our guidance to better reflect this outlook,” said Craig Herkert, CEO and president. “Our sales performance continues to reflect a difficult operating environment. As the company moves into the next phase of its business transformation, we remain focused on our customers and taking actions that will better meet their needs. I remain confident that we have the correct strategy in place to achieve long term success.”
Second quarter retail food net sales were $6.7 billion compared to $7.4 billion last year, a decrease of 9.7%, primarily reflecting the impact of identical store sales of negative 6.4% and previously announced market exits. Excluding Shaw’s, which was impacted by a labor dispute settled early in the quarter, identical store sales were negative 5.9%.
Retail food net sales in the second quarter of fiscal 2011 represented 77.3% of net sales compared to 78.3% last year. Supply chain services net sales in the second quarter of fiscal 2011 represented 22.7% of net sales compared to 21.7% last year.
Gross profit margin in the second quarter was $1.9 billion, or 22.3% of net sales, compared to $2.1 billion or 22.1% last year. The increase in gross margin as a percent of net sales primarily reflects more effective promotional spending partially offset by targeted investments in price.
Selling and administrative expenses in the second quarter were $1.7 billion, or 20.0% of net sales, compared to $1.8 billion, or 19.5% last year. The increase in selling and administrative expenses as a percent of net sales primarily reflects reduced sales leverage and variance in surplus property expense that more than offset the savings achieved from ongoing cost reduction initiatives.
Second quarter retail food operating loss was $1.441 billion. When adjusted for the $1.600 billion impairment expense and $17 million in pre-tax charges primarily related to the impact of the labor dispute at Shaw’s as well as employee-related costs, retail food operating earnings were $176 million, or 2.6% of net sales. Last year’s retail food operating earnings were $188 million, or 2.5% of net sales.
