Pantry profit jumps

Earnings quadruple

SANFORD -- For the Pantry, a year of cost-cutting and a little end-of-year luck added up to a fourth quarter that most companies can only dream of in the current economy.

The Sanford-based chain of more than 1,600 convenience stores reported earnings of $22.9 million for the quarter that ended Sept. 25, up from $5.6 million in the fourth quarter of 2007.

Sales also rose, to $2.5 billion from $2.0 billion in the fourth quarter of 2007.

President and CEO Peter Sodini said the company finished its fiscal year "on a strong note," despite the recent turmoil in oil and gas prices.

"We had a pretty good final quarter to conclude an unprecedented year," he said in a conference call with reporters and analysts Thursday.

The year finished strong enough for the company to resume seeking smaller chains to buy, which has historically been the Pantry's main strategy for growth.

"We don't want to convey the impression that we are looking for a 700- or 800-store acquisition," Sodini said. "We are looking for small pockets of stores in markets that we already have a presence in."

The Pantry also moved ahead last month with once-delayed plans to shift its corporate headquarters and part of its staff to new offices in Cary.

Still, despite the positive end-of-year news, Pantry executives said they are moving slowly, expecting 2009 to also be a challenging year.

On the call, Sodini stressed that people are still driving less, planning to stay closer to home and conserving money despite the recent dramatic drop in gas prices.

"It remains to be seen how gas demand will shake out over the months ahead," Sodini said. "The overall economy continues to weaken."

Though revenue and income rose, the key indicators of gallons sold and merchandise sales both declined for The Pantry, said Bryan Hunt, managing director of high yield research for Wachovia Capital Markets.

The Pantry's stock closed at $16.31, down $5.10 Thursday. The shares are down 41 percent in the past year.

Still, the Pantry's quarterly sales declines were not nearly as severe as those at some other retail companies, and the Pantry has been smart to increase its available cash heading into 2009, Hunt added.

"Companies that have liquidity in this environment should come out of this environment in very, very good shape," he said. "Perhaps it gives the Pantry the opportunity to make acquisitions on the cheap."

Sodini said in the conference call that any new acquisitions likely would not come for at least a few months.

But Hunt said that even without more stores, the Pantry may have gained market share during the last few months.

"Relative to the independents and because of their fuel contracts, they most probably gained market share," he said. "That will play out more in the December quarter."