Vons Reports That Its Third-Quarter Revenue Was Flat : Retailing: The results indicate that Southern California’s economic slump is being felt even in an industry considered recession-proof.
Vons Cos., Southern California’s largest supermarket chain, said Tuesday that sales in the third quarter were flat, showing early signs that the soft California economy has affected what has been considered a recession-proof industry.
The supermarket chain said its net profit rose 5.1% in the quarter ended Oct. 6, but sales were $1.64 billion, the same as the year-ago quarter. Net income rose to $22.5 million, or 52 cents a share, from $21.4 million, or 55 cents a share, in the year-ago period. The 5.5% decrease in the per-share figure resulted from an increase in the number of shares--to 43.6 million from 38.8 million.
The flat sales for Vons, which has 319 stores, are a result of a soft Southern California retailing market that stems from a jobless rate higher than the national average. The slump at grocery stores, considered less vulnerable to slowdowns in the economy than other retailers, comes as consumers are increasingly price-conscious, opting for lower-priced items, analysts said.
“You never want to have one of these to occur, but this is not cataclysmic for Vons,” said Neil Stern, a partner at McMillan-Doolittle, a Chicago-based retail strategy firm. “It is probably an overstatement to say that supermarkets are recession-proof. They usually can weather out a downturn better than other retailers because people have to eat. It might be better to say they are recession-resistant.”
Today, supermarket consumers may choose lower-priced French’s mustard to Gray Poupon--or hamburger to steak, Stern said.
Mary McAboy, a Vons spokeswoman, downplayed the decrease in per-share figures, saying that the company’s gross profit margin in the third quarter improved to 24% from 22.7% in the year-ago period. She said the improvement reflects the Arcadia-based supermarket’s ongoing remodeling, which has increased store selections.
Still, Vons has recently seen a decline in consumer confidence, leading customers to purchase advertised items and use double coupons, McAboy said.
“People are more sensitive to prices,” she said. “They have responded by carefully purchasing products, reflected more on buying. Rather than buy a premium chicken salad at the deli, they’re buying potato salad.”
