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Cost of buying supermarket chain hits Tops Markets profits

Top Markets lost money during the fourth quarter as the supermarket chain was hit with expenses from its management buyout during December and flat same-store sales.

The supermarket chain had an operating loss of $2.8 million, compared with an operating profit of $7.2 million a year ago, the company said in its first public report on its finances in more than 17 months. The company said much of the operating loss was due to the $15.8 million in costs that the company absorbed because of the management buyout that put Tops under the control of chief executive Frank Curci and other top managers.

Add in interest expenses and other debt-related costs, and Tops’ net loss was $19.5 million. That is down substantially from the $37.8 million loss a year ago, when the company took on $31 million in debt expenses in a refinancing that allowed the supermarket chain to stop making publicly-available financial reports. Following the management buyout, the company’s debt now meets the requirements that mandate publicly available financial reports.

Tops’ sales rose by 2 percent to $571.3 million from $560.2 million, mainly because the company has acquired seven supermarkets and opened two new stores since the end of 2012.

Tops said its sales at stores that have been open for at least a year were flat during the fourth quarter, as the sluggish economy in the supermarket’s market area in upstate New York, northern Pennsylvania and Vermont put a damper on revenues. The company also said the newly opened stores and the supermarkets it acquired, mainly in the Syracuse market, took some sales from Tops’ existing supermarkets, further hurting same-store revenues.

“There were a number of headwinds this past year that challenged our business,” Curci said Friday during a conference call.

Sales from Tops’ 156 stores rose by 3 percent to $524.2 million, with all of the increase coming from the $13.9 million in revenues that came from the newly opened and acquired stores.

Gasoline sales fell by 5 percent to $47.1 million as a nearly 8 percent drop in average fuel prices offset a 2.5 percent increase in the number of gallons sold at its 47 fueling stations.

Tops said it plans to spend $40 million to $45 million on capital investments this year, down from $54 million last year but up from $38 million in 2012. Tops plans to build a new store this year in Corning and build replacements for two others in the Rochester area. The company also plans to add fueling stations to five additional supermarkets, said Katie McKenna, a Tops spokeswoman.

“We have ambitious plans for the future,” Curci said.

Those plans could include building new supermarkets in smaller communities that Tops executives consider to be under served by existing stores, as well as smaller, “tuck-in” acquisitions of independent grocery stores that would fill in gaps within Tops’ existing markets, Curci said.

“We’ve done very well with those types of acquisitions in the past,” Curci said. “They tend to be smaller stores that might tend to do $6 million to $8 million a year.”