SALISBURY, NC – Food Lion, Inc. reported today that earnings of $60.0 million for the second quarter of 1998 were up 26 percent over earnings of $47.8 million for the same quarter last year. The Company announced consolidated quarterly sales of $2.4 billion, which were up 1.2 percent over second quarter 1997 sales of $2.3 billion. Excluding prior year sales in the Southwest market which has since closed, total sales were up 4.8 percent over the prior year.
Same store sales increased 2.7 percent for the quarter, and are up 2.2 percent for the year to date. Basic earnings per share were $0.13 as compared to $0.10 last year. The Company maintained a healthy net margin of 2.5 percent of sales.
“Efficiencies Food Lion has achieved throughout the years continue to give the Company an edge during times of low inflation and heavy competitive activity,” said Food Lion President and Chief Executive Officer Tom Smith. “Our success is demonstrated by our ability to deliver strong earnings for our shareholders, in spite of soft retail sales currently experienced by the grocery industry.”
Top line sales were impacted by a change in the way in which Food Lion collects sales tax on MVP-discounted products. Beginning in May, after receiving permission from state departments of revenue, Food Lion began collecting sales tax on the net price of MVP discounted products, rather than on the full retail price of MVP items that had a vendor-funded discount. This net impact to sales for this quarter was a decrease of approximately $26 million from the amount that would have been reported. The same store sales calculation is not affected.
“By working with states to simplify the way the Company collects sales taxes, we have been able to reduce the sales taxes our customers pay on the products they buy, and have made it easier for customers to calculate the sales tax on their total grocery bill,” Smith added.
During the quarter, Food Lion continued its expansion plans by opening 19 new stores (including four relocated stores) in Augusta, Ga.; Mt. Airy and Upper Marlboro, Md.; Reidsville, Spring Hope, and Statesville, N.C.; Columbia, Myrtle Beach, and Winnsboro, S.C.; Danville, Hampton, Manassas, Mt. Jackson, Richmond, Timberville, Williamsburg, and Winchester, Va.; and Buckhannon, W.Va. Kash n’ Karry opened a store in Lehigh Acres, Fla. Food Lion Stores in Tampa, Fla., Altoona, Penn., and Kingsport, Tenn. were closed.
The Company operated 1,175 supermarkets at the end of the quarter. Food Lion is on track with plans to open 75 new stores in 1998, having opened 33 new stores so far this year. Renovations were completed at 50 stores during the quarter, for a total of 56 to date in 1998. The Company projects a total of 133 remodels for the current year.
With 1997 sales of $10.2 billion, Food Lion is one of the nation’s largest supermarket chains. The Company is the largest private employer in North Carolina and Virginia, and has a total of more than 83,000 employees. Food Lion serves more than 10 million customers a week at 1,175 Food Lion and Kash n’ Karry supermarkets in 11 states.
Safe Harbor Statement Regarding Forward-looking Information or Statements
This document contains forward-looking statements that involve uncertainties. Factors that could cause results to differ materially from those in the forward-looking statements are detailed from time to time in reports filed by the Company with the SEC, including Forms 8K, 10Q and 10K.
Contact: Chris Ahearn (704) 633-8250, Ext. 2892