The Pantry reports fourth-quarter earnings that miss Wall Street estimates

Dennis Hatchell, CEO of The Pantry Inc.
Dennis Hatchell, CEO of The Pantry Inc.

The Pantry reported fourth-quarter earnings early Tuesday that missed Wall Street estimates.

Excluding the impact of impairment charges, the Cary convenience store chain reported net income of $1.4 million, or 6 cents per share, compared with a net loss of $2 million, or 9 cents per share in the fourth quarter of 2012. That was below the $2.25 million, or 11 cents per share, that was the consensus among analysts who cover the company, according to Bloomberg.

For the year, The Pantry reported an adjusted net loss of $100,000, compared with net income of $4.7 million in 2012.

The Pantry has 1,541 stores throughout the Southeast, primarily under the Kangaroo Express brand. The company has been working to offset declines in fuel sales at its stores with increased merchandise sales.

It has been remodeling some stores and tailoring others to appeal to local audiences. The Pantry has remodeled 72 stores so far this year and expects to remodel 10 percent of its stores in 2014.

On a conference call with analysts, CEO Dennis Hatchell said those efforts are working, noting that comparable store merchandise sales increased 2 percent per customer in the quarter.

“When customers visit our stores, they are responding to our marketing initiatives and our product offerings, generating a higher sale per customer,” he said.

The company sold less gasoline during the quarter, but the profit margins on the fuel it did sell improved.

Comparable store fuel gallons sold declined 2.5 percent. Fuel gross profit was $47.8 million, up from $44 million a year ago.

The company’s performance was also hurt by the fact that its stores are in the Southeast, which continued to have the lowest retail fuel margins of any area of the United States, according to Oil Price Information Service.

Hatchell said the company continues to look for potential acquisition targets to boost growth.

“To accelerate our overall growth and build value, we’re targeting up to four new stores this year and will continue assessing acquisition opportunities of individual stores as well as chains,” he said.

The Pantry’s shares closed Tuesday at $14.31, down 27 cents. The stock is up 18 percent this year.