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McClatchy-Tribune  06/05/2014 11:09 PM ET
Cold winter cooled earnings at Tops Markets [The Buffalo News, N.Y. :: ]

June 05--THE COLD WINTER -- and the higher utility and snow plowing costs that came with it -- took a toll on Tops Markets during the first 3 1/2 months of this year.

The supermarket chain said its losses more than tripled to $13.7 million during the first quarter as its utility costs soared by 41 percent and its interest expenses jumped by almost a third because of its bigger debt load. Those added expenses, which totaled more than $10 million, accounted for most of the increase in Tops' loss, which jumped from a loss of $4.2 million a year ago.

Frank Curci, Tops' president and chief executive officer, described the company's first-quarter performance as "a mixed bag," where improving sales, including a 1.1 percent increase in revenues from stores open for at least a year, were offset by the spike in utility costs and interest payments.

"Our operating expenses were impacted by the rough winter," Curci said on Thursday.

Tops' total sales grew by 2.8 percent during the quarter, to $757 million from $736 million as the company acquired four supermarkets over the past year and opened one new store. Sales from inside Tops stores rose by 2.9 percent to $689 million. Part of the increase was due to the timing of the Easter holiday, with last year's sales being reduced because it included the traditionally slow-selling week after Easter, while that week falls in the second quarter this year. The difference in timing accounted for a little more than a quarter of the gain in revenues.

Fuel sales grew by 2.2 percent to $68 million, as a 6.4 percent increase in the number of gallons sold was partly offset by a 3.9 percent decline in the average price per gallon.

The loss also was exacerbated by a 41 percent jump in Tops' utility costs during the quarter, caused by a winter spike in electricity, commodity costs and higher power consumption due to the unusually cold temperatures.

Curci, in response to an analyst's question, said Tops does not expect to open a second Orchard Fresh store this year as the company looks for ways to tweak its new concept store and improve its sales.

"It's still a work in progress," Curci said. "Sales are below where we thought they'd be at this point."

Curci said Tops executives want to strengthen the performance of the concept's lone store in Orchard Park before adding any more stores under the same banner.

"We're trying to do things to attract more people into the store," he said. "It's a new business and we're still trying to get our arms around it."

Tops opened its first Orchard Fresh store, a smaller, high-end gourmet and specialty food retail shop concept aimed at upscale shoppers and the growing popularity of organic food, in April 2013, with hopes that a second store could follow as early as this spring.

Curci also downplayed the impact of new players in the organic and healthy food niche that have targeted the Buffalo Niagara market, including Trader Joe's, which opened a store in Amherst last year, and Whole Foods, which plans to open an Amherst store in 2016.

"I think the market is slightly more competitive than it's been," Curci said, although he said the impact of the Trader Joe's opening was mainly limited to the Tops stores within a few miles of the Trader Joe's store on Niagara Falls Boulevard.

The company earlier this year replaced two larger Tops Markets in the Rochester suburbs with new supermarkets based on its new store concept that features expanded produce, prepared foods and natural and organic sections within a store that ranges around the mid-50,000-square foot range in size. Tops has plans to open one new store during the rest of this year and add fueling stations to three others, said Rick Mills, the chain's chief financial officer.



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