For four straight quarters, grocer Pathmark (NASDAQ:PTMK) has disappointed Wall Street with its earnings numbers. Can the company break its losing streak when it reports Q1 2006 results tomorrow?
What analysts say:
- Buy, sell, or waffle? Unchanged from last quarter, the three analysts following this one still break down as two buys and a hold.
- Revenues. Also unchanged: sales -- this time from last year. They're expected to come in flat against Q1 2005 at an even $1 billion.
- Earnings. The one thing that does change is that analysts expect Pathmark to lose more money this quarter than last. A $0.07 per-share loss is predicted.
What management says:
According to a sales report issued earlier this month, it looks like expecting no sales growth whatsoever was too much to hope for at Pathmark. CEO John Standley warned investors recently that his firm's same-store sales appear to have declined 6 basis points (that's six-hundredths of 1%, in plain English) versus last year. And total sales declined from a hair over $1 billion to a hair under $1 billion for the quarter.
Boring? Hey, this is groceries, folks. If you want excitement, invest in high tech.
What management does:
Pathmark continues to hold its gross margin steady at the mid-point between 28% and 29%. Operating costs, however, continue to rise despite a complete lack of growth in sales. As a result, the firm's rolling operating margin continues to erode. As for the apparent improvement in Pathmark's net margin shown below -- ignore it. That's simply the removal of the dead weight from the January 2005 impairment charge being lifted off of the trailing 12-month results.
|
Margins % |
10/04 |
1/05 |
4/05 |
7/05 |
10/05 |
1/06 |
|---|---|---|---|---|---|---|
|
Gross |
28.4 |
28.5 |
28.5 |
28.6 |
28.5 |
28.4 |
|
Op. |
1.8 |
1.5 |
1.4 |
1.3 |
0.9 |
0.3 |
|
Net |
0.1 |
(7.8) |
(7.7) |
(7.8) |
(8.2) |
(1) |
One Fool says:
There's precious little good to say about Pathmark these days. Free cash flow, that silver lining that my fellow Fool Shannon Zimmerman pointed to a few months ago, continued to run negative last quarter (just as I predicted it would.)
Until the company gets its sales rising again and/or completes its store remodeling project so as to halt the rise in operating costs and decrease the level of capital expenditures being made, I don't expect we'll have much good news to report.
Competitors:
- A&P (NYSE:GAP)
- Albertson's (NYSE:ABS)
- Foodarama (AMEX:FSM)
- Koninklijke Ahold (NYSE:AHO)
- Supervalu (NYSE:SVU)
- Kroger (NYSE:KR)
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Fool contributor Rich Smith does not own shares of any company named above.
