ShopKo Stores Inc. loses $4M in 1Q

GREEN BAY, WI — Weighed down by continuing losses at its Pamida Stores division, heartland discounter ShopKo Stores Inc. recorded a first-quarter loss of $4.0 million, compared with a year-ago profit of $1.8 million.

The Pamida unit posted an operating loss of $8.4 million vs. a modest profit last year of $416,000. But acting as a ballast was the larger ShopKo chain, where operating profits climbed by 9.0 percent, to $24.9 million from $22.8 million last year.

Boosted by sharply stronger sales, if not profits, at the Pamida unit, ShopKo Stores sales advanced by 4.3 percent, to $781.8 million from $749.6 million the prior year. Same-store sales declined by 0.8 percent, compared with a 2.6 percent increase the year before.

Acting as a drag on profits, in addition to the losses at Pamida, were weakened margins at both the ShopKo and Pamida chains, which more than offset lower costs. Average gross margin eroded by 320 basis points, to 22.4 percent from 25.6 percent a year ago. Gross margin dollars declined by 8.8 percent, to $175.0 million from $191.8 million. But steadily hacking away at costs, the retailer slashed its expenses by 240 basis points, to 18.3 percent from 20.7 percent last year. Measured in absolute dollars, costs were pared by 7.8 percent, a cash savings of $12.1 million.

"First-quarter results were disappointing, but we continue to work diligently on improving results for the year," said Bill Podany, president and ceo. "The continued difficulty in the retail environment coupled with our own execution issues at the Pamida division make this goal more challenging."