Ruddick's Q2 earnings rise 19.8% to US$27.5M, sales increase 6.1% to US$1.07B, driven by improvements at both of company's operating subsidiaries, Harris Teeter and A&E
CHARLOTTE, North Carolina
April 29, 2010
– Ruddick Corporation (NYSE:RDK) (the "Company") today reported that consolidated sales for the fiscal second quarter ended March 28, 2010 increased by 6.1% to $1.07 billion from $1.01 billion in the second quarter of fiscal 2009. For the 26 weeks ended March 28, 2010, consolidated sales increased by 5.3% to $2.11 billion from $2.00 billion for the comparable period of fiscal 2009. The increase in consolidated sales for the quarter and 26-week period was attributable to sales increases at both of the Company's operating subsidiaries - Harris Teeter, the Company's supermarket subsidiary, and American & Efird ("A&E"), the Company's sewing thread and technical textiles subsidiary.
The Company reported that consolidated net income in the second quarter of fiscal 2010 increased by 19.8% to $27.5 million, or $0.57 per diluted share, from the $22.9 million, or $0.48 per diluted share reported in the prior year second quarter. For the 26 weeks ended March 28, 2010, consolidated net income increased by 11.8% to $51.2 million, or $1.06 per diluted share, from the $45.8 million, or $0.95 per diluted share reported in the same period of fiscal 2009. The increase in net earnings for both the fiscal quarter and 26-week period was driven by operating profit improvements at both Harris Teeter and A&E when compared to the prior year periods.
Harris Teeter sales increased by 5.4% to $1.0 billion in the second quarter of fiscal 2010, from sales of $949 million in the second quarter of fiscal 2009. For the 26 weeks ended March 28, 2010, sales rose 5.0% to $1.97 billion from $1.88 billion in the same period of fiscal 2009. The increase in sales for the quarter and 26-week period was attributable to incremental new store sales that were partially offset by comparable store sales declines during the respective periods. Comparable store sales declined 1.33% for the second quarter of fiscal 2010 and declined 1.85% for the 26-week period ended March 28, 2010. Comparable store sales for the quarter and 26-week period were negatively impacted by retail price deflation driven by increased promotional activity and changes in consumer purchasing habits, reflective of the current economic environment. In addition, harsh weather conditions in some of Harris Teeter's markets had a positive impact on comparable store sales for the second quarter of fiscal 2010.
During the first half of fiscal 2010, Harris Teeter opened 9 new stores and closed 3 existing stores, 2 of which were replaced by new stores. Since the second quarter of fiscal 2009, Harris Teeter has opened 20 new stores and closed 4 stores, for a net addition of 16 stores. Harris Teeter operated 195 stores at the end of the second quarter of fiscal 2010.
Harris Teeter's operating profit for the second quarter of fiscal 2010, increased 4.6% to $47.1 million (4.71% of sales) from the $45.0 million (4.74% of sales) reported in the second quarter of fiscal 2009. For the 26 weeks ended March 28, 2010, operating profit was $89.4 million (4.53% of sales), as compared to $89.4 million (4.76% of sales) in the prior year period. Operating profit was impacted by new store pre-opening costs of $2.2 million (0.22% of sales) and $3.4 million (0.36% of sales) in the second quarter of fiscal 2010 and fiscal 2009, respectively. Pre-opening costs for the 26-week periods ended March 28, 2010 and March 29, 2009 were $4.8 million (0.24% of sales) and $7.4 million (0.39% of sales), respectively. New store pre-opening costs fluctuate between reporting periods depending on the new store opening schedule.
The increase in Harris Teeter's operating profit in the second quarter of fiscal 2010 resulted primarily from sales increases that provided leverage against fixed costs and a continued emphasis on operational efficiencies and cost controls. The increase was offset, in part, by the continued promotional retail price investments made to enhance the overall value provided to Harris Teeter customers, increased occupancy costs and increased pension expense.
Thomas W. Dickson, Chairman of the Board, President and Chief Executive Officer of Ruddick Corporation commented that, "We have continued to drive customer shopping visits and loyalty through the investments we have made in our in-store promotional activity and lower everyday prices. While our store-brand business remains strong we are starting to see the national brands offer additional vendor funding for promotional activities. During the first half of fiscal 2010, we realized a greater number of items sold and increased customer shopping visits in our comparable stores. Additionally, our customer loyalty data indicates that the number of active households increased by 1.29% per comparable store. We have been successful in offsetting a significant portion of our investment in prices through operational efficiencies and cost saving initiatives throughout the organization. As a result, selling, general and administrative costs as a percent of sales decreased to 25.63% for the second quarter of fiscal 2010, as compared to 26.33% in the prior year. Our customers continue to respond positively to our pricing and promotional investments; however, they also demand the quality, value, variety and service we have always provided and we will continue to provide. In addition, we are well positioned to provide our customers with the more discretionary items like seafood and floral where we are beginning to see more customer activity."
A&E sales increased by 16.9% to $70.8 million in the second quarter of fiscal 2010, from sales of $60.6 million in the second quarter of fiscal 2009. For the 26 weeks ended March 28, 2010, sales rose 9.8% to $139.0 million from sales of $126.6 million in the prior year 26-week period. Foreign sales accounted for approximately 53% of A&E's second quarter sales in both fiscal 2010 and fiscal 2009. For the 26-week periods, foreign sales accounted for approximately 54% of A&E's sales in fiscal 2010, as compared to 55% in fiscal 2009.
A&E recorded operating profit of $3.1 million for the second quarter of fiscal 2010, as compared to an operating loss of $4.6 million in the second quarter of fiscal 2009. For the 26 weeks ended March 28, 2010, A&E's operating profit was $7.1 million, as compared to an operating loss of $5.7 million for the same period of fiscal 2009. Operating profit improvements were realized in A&E's U.S. operations and the majority of its foreign operations. The increase in sales, along with inventories being in line with sales volumes, contributed to improved operating schedules at most of A&E's manufacturing facilities. Improved operating results were also realized through the cost reduction measures taken in fiscal 2009.
Mr. Dickson said, "We are very pleased with A&E's results for the first half of fiscal 2010. The improvements in retail sales of apparel and automobiles have had a positive impact on A&E's sales throughout its global network. A&E's previous efforts to consolidate manufacturing capacities and reduce operating and overhead costs have contributed significantly to the improvement in profitability as sales and production volumes have risen. In addition, improved operating results have also been realized through the sizeable Asian operations in which A&E holds a noncontrolling interest. Today, A&E has over 60% of its total finishing production capacity located in Asia, including its joint ventures. We will continue to enhance our international operations and evaluate A&E's structure to best position A&E to take advantage of opportunities available through these operations."
For the first half of fiscal 2010, depreciation and amortization for the consolidated Company totaled $66.4 million and capital expenditures totaled $49.0 million. Total capital expenditures during the 26 weeks ended March 28, 2010 were comprised of $47.5 million for Harris Teeter and $1.5 million for A&E. During the first half of fiscal 2010, Harris Teeter made an additional net investment of $1.8 million ($9.4 million additional investments less $7.6 million received from property investment sales and partnership returns) in connection with the development of certain new stores. Additionally, A&E spent $0.3 million to acquire the noncontrolling interest in its joint ventures in South Africa and now has a 100% ownership interest.
Harris Teeter's strong operating performance and financial position provides the flexibility to continue with its store development program for new and replacement stores along with the remodeling and expansion of existing stores. Harris Teeter plans to open an additional 4 new stores and complete major remodeling of one additional store (which will be expanded in size) during the remainder of fiscal 2010. The new store development program for fiscal 2010 is expected to result in a 6.4% increase in retail square footage, as compared to an 8.7% increase in fiscal 2009. The Company routinely evaluates its existing store operations in regards to its overall business strategy and from time to time will close or divest underperforming stores.
Harris Teeter's capital expenditure plans entail the continued expansion of its existing markets, including the Washington, D.C. metro market area which incorporates northern Virginia, the District of Columbia, southern Maryland and coastal Delaware. Real estate development by its nature is both unpredictable and subject to external factors, including weather, construction schedules and costs. Any change in the amount and timing of new store development would impact the expected capital expenditures, sales and operating results.
The Company's planned consolidated capital expenditures for fiscal 2010 are approximately $130 million, consisting of $125 million for Harris Teeter and $5 million for A&E. Such capital investment is expected to be financed by internally generated funds, liquid assets and borrowings under the Company's revolving line of credit. The Company's revolving line of credit provides substantially more liquidity than what management expects the Company will require through the expiration of the line of credit in December 2012.
The Company's management remains cautious in its expectations for the remainder of fiscal 2010 due to the current economic environment and its impact on the Company's customers. Harris Teeter will continue to refine its merchandising strategies to respond to the changing shopping demands and to maintain or increase its customer base. The retail grocery market remains intensely competitive and there is no assurance that the recent improvements in the textile and apparel industries will continue. Any operating improvement will be dependent on the Company's ability to increase Harris Teeter's market share, to continue to rationalize A&E's operations, to offset increased operating costs with additional operating efficiencies, and to effectively execute the Company's strategic expansion plans.
This news release may contain forward-looking statements that involve uncertainties. A discussion of various important factors that could cause results to differ materially from those expressed in such forward-looking statements is shown in reports filed by the Company with the Securities and Exchange Commission and include: generally adverse economic and industry conditions; changes in the competitive environment; economic or political changes in countries where the Company operates; changes in federal, state or local regulations affecting the Company; the passage of future tax legislation, or any negative regulatory or judicial position which prevails; management's ability to predict the adequacy of the Company's liquidity to meet future requirements; volatility of financial and credit markets which would affect access to capital for the Company; changes in the Company's expansion plans and their effect on store openings, closings and other investments; the ability to predict the required contributions to the Company's pension and other retirement plans; the Company's requirement to impair recorded goodwill or long-lived assets; the cost and availability of energy and raw materials; the continued solvency of third parties on leases the Company guarantees; the Company's ability to recruit, train and retain effective employees; changes in labor and employer benefits costs, such as increased health care and other insurance costs; the Company's ability to successfully integrate the operations of acquired businesses; the extent and speed of successful execution of strategic initiatives; and, unexpected outcomes of any legal proceedings arising in the normal course of business. Other factors not identified above could cause actual results to differ materially from those included, contemplated or implied by the forward-looking statements made in this news release.
Ruddick Corporation is a holding company with two primary operating subsidiaries: Harris Teeter, Inc., a leading regional supermarket chain with operations in eight states primarily in the southeastern and mid-Atlantic United States, including the District of Columbia; and American & Efird, Inc., one of the world's largest global manufacturers and distributors of industrial sewing thread, embroidery thread and technical textiles.
Selected information regarding Ruddick Corporation and its subsidiaries is attached. For more information on Ruddick Corporation, visit our web site at:www.ruddickcorp.com.