Pathmark Considers Sale

"Our commitment to enhance shareholder value is our top priority, and while we are working hard to improve our performance, we're looking at a number of alternatives in our effort to build value for our shareholders," CEO Eileen Scott told analysts during the conference call. "This process could result in a decision to sell the company, although no such decision has been made at this time.

As far as the numbers, management of the 142-store supermarket chain announced that the company's loss the Q3 was wider than expected, $3.6 million, or 12¢ a share, from a loss of $200,000, or 1¢ a share a year earlier. Company officials also revealed that the loss would have been $2.8 million, or 10¢ a share except for an interest charge of 2¢ a share from the early extinguishment of a credit agreement.

Sales were up slightly, to $979.9 million from $978.5 million a year earlier. But per-unit sales of stores open for at least a year were off slightly, by half a percent.

For nine months, the net loss was $7 million, or 23¢ a share, compared to net earnings of $6.9 million, or 23¢ per diluted share. Sales were up slightly, to $2,981.7 million from$2,978.8 million.

Officials also told analysts that the company, whose stores are in the New Jersey, New York and Philadelphia metro areas, is sticking by its full-year forecast for a loss of between 13¢ and 25¢ a share. Last year, the company earned 66¢ a share on total sales of just under $4 billion.

"While we are clearly disappointed with our Q3 results, we're taking steps to improve our business trend," Scott told analysts. "We've adjusted our sales and advertising programs to be better aligned with our current sales expectations, and we've implemented expense controls. We are on target to achieve the fiscal 2004 guidance we provided in late October."

Asked about 2005, Scott declined to provide an estimate, citing "uncertainty in the market outlook and a lack of visibility as far as the long-term impact of our initiatives."

In terms of potential buyers, company officials declined to discuss the possibilities. Industry sources suggest that given Pathmark's locations, its real estate holdings and the fact that grocery-anchored strip centers remain a hot commodity in the region, that more interest is likely to come from retail competitors interested in the locations, rather than from investment groups.

News of the potential sale of the company drove its stock slightly higher, by 2.5% to $5.70 per share in early NASDAQ trading. By the end of the day, Pathmark's stock had risen further, closing at $6 per share. At its peak, the company's stock had traded at $25 per share.