The Pantry Inc. expects its gasoline gross margin and earnings per share for the fiscal year–ending Sept. 27, 2007–to be below its previous targets.
Based on preliminary data, the company expects its retail gasoline gross margin for the fourth fiscal quarter to be between 10 cents and 10.5 cents per gallon, bringing its fiscal year 2007 retail gasoline margin to approximately 10.9 cents per gallon, substantially below the approximately 11.5 cents per gallon that was previously expected. As a result, the company expects its earnings per share for the fourth quarter and the full fiscal year to also be below previous expectations.
“Our merchandise business turned in a solid fourth quarter, with comparable sales above targeted levels and merchandise gross margins improved from the third quarter.
However, we have not seen the seasonal improvement in gasoline gross margins that we have usually experienced after Labor Day,” Chairman and CEO Peter J. Sodini. “To the contrary, our gas margins have declined this month, reflecting increased oil and gasoline prices, tight supplies and scattered refinery shutdowns.”
In an effort to reduce operating, general and administrative expenses, the company has implemented a restructuring program aimed at reducing expenses by at least $6 million in fiscal 2008, which will necessitate a one-time charge in the fourth quarter of fiscal 2007.
“While we certainly regret the human impact of our restructuring program, we realized we had to be more proactive in the current challenging environment to ensure that we can deliver the leverage we need on our operating, general and administrative expenses,” said Sodini.
The Pantry also provided additional details regarding its fiscal 2008 outlook. In view of the current near-record oil prices and volatile gas margins, the company is broadening its target range for retail gasoline margins in fiscal 2008 to between 11 and 13 cents per gallon. Excluding potential acquisitions, the company expects merchandise sales to grow about 10%.