ShopKo posts $1.1 million Q1 loss

By Don Hogsett -- Home Textiles Today, 5/26/2003 12:00:00 AM

GREEN BAY, WI —

Hit by falling sales and a $900,000 after-tax charge stemming from the way it now accounts for vendor allowances, ShopKo Stores recorded a first-quarter loss of $1.1 million, recovering from a year-ago loss of $185.6 million when it piled-on non-cash accounting charges stemming from its earlier acquisition of Pamida Stores.

Pulling out all the one-time items to create a clearer picture, operating profits fell by 34.3 percent, to $9.1 million from $13.9 million, hurt by lower sales and higher costs, which offset stronger margins and improvement in the Pamida business.

Overall, ShopKo sales fell by 2.9 percent, to $707.9 million from $728.8 million last year in a notably weak retail environment. Same-store sales declined by 2.7 percent.

Hardest hit was the core ShopKo business, where overall sales and same-store sales both fell by 4.0 percent, to $530.5 million from $552.5 million last year, detracting from a turnaround in the smaller Pamida segment. Pamida sales inched ahead by 0.6 percent, to $177.4 million from $176.3 million, while same-store sales improved by 1.3 percent.

Operating profits in the ShopKo segment tumbled by 36.9 percent, to $15.8 million from $25.1 million. Pamida, meanwhile, slashed its losses in half, by 49.9 percent, to $1.4 million from $2.7 million, largely on the strength of substantial margin expansion. Average gross margin at Pamida improved by 230 basis points, or 2.3 percentage points, to 26.1 percent from 23.8 percent a year ago. Ironically, margins were somewhat stronger at Pamida, 26.1 percent, than at the larger ShopKo business, 25.7 percent.

Overall margins for the entire company, aided by Pamida, improved to 25.8 percent from 25.4 percent. But acting as an offset, costs climbed higher as well, to 22.0 percent of sales from 21.0 percent a year ago.

In a big lift to the bottom line, the retailer pared its interest expense by 16.6 percent, to $10.9 million from $13.1 million, generating a cash savings of $2.2 million.

ShopKo Stores Inc.