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CARTERET, NJ-Pathmark’s profits are down for its second quarter of 2006, despite a modest same store sales increase. The supermarket lost $8.8 million this quarter, $0.17 per diluted share, due to a variety of cost escalations.

Last year’s 2Q net loss was $5.1 million. The decline this year was largely due to an EBITDA drop. It was $26.9 million this quarter, compared to $31.7 million last year. Same store sales are up 0.5% to $1,002.9 million, versus $1,000.7 million from a year ago.

The $4.8-million decline is due to lower gross profits of $1 million (largely a pharmaceutical hit from Medicare Part D), higher utility costs of $2.3 million, self-insured workers’ compensation and general liability costs of $2.2 million, medical and pension of $1.9 million, and supplies of $0.6 million. A credit of $3.2 million for new accounting of breakage income from gift cards softened the blow.

Pathmark is in the middle of a revamping effort over the past year, covering the gamut from produce upgrades to rebranding to cost-cutting and the removal of in-store clutter.

“We’re a little behind our objectives from an earnings perspective,” says John Standley, Pathmark CEO, “but we’re gaining traction with our initiatives.”

“Our pharmaceuticals margin was affected by the transfer of Medicaid scrips to Medicare Part D, as well as a reduction in generic reimbursement rates for certain plans,” says Frank Vitrano, CFO.

“We expect to see improvements in gross margin due to sales mix and lower shrink as the fiscal year progresses,” says Standley. “On the cost side, we expect our various initiatives will help mitigate expected expense increases during the remainder of the fiscal year.”

Pathmark currently operates 141 supermarkets, primarily in the New York/New Jersey and Philadelphia metropolitan areas.

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