Tops Markets profits hurt by generic drug availability
Nov 20, 2012 (Menafn - The Buffalo News - McClatchy-Tribune Information Services via COMTEX) --The availability of less expensive generic versions of some popular prescription drugs, coupled with a slip in the profitability of its growing gasoline sales, caused Tops Markets' third-quarter profits to slide by 27 percent, the Amherst-based supermarket chain said.
Tops said its profits fell to 4.7 million from 6.4 million a year earlier as overall sales held steady at 538 million.
Despite Tops' ongoing efforts to reduce its costs, the grocery store chain was hurt by a 1.3 percent decline in sales at stores that have been open for at least a year, with all of the reduction in revenues coming from a number of popular name-brand drugs now having less costly generic alternatives available.
That switch to generics led to a 3.7 million drop in sales at the company's in-store pharmacies, which accounted for all of the 3.4 million drop in same-store sales at the company's stores.
In addition, the company's earnings were hurt by the declining profitability of its gasoline sales, which have become a bigger portion of Tops' overall business as it has steadily added fueling stations at its stores.
While gasoline sales jumped by 7 percent during the quarter to 51 million as consumers purchased 5 percent more gallons and the price of that gas rose by almost 2 percent, those sales were less lucrative because of the costs associated with Tops' gasoline rewards program, which gives customers a discount of 10 cents per gallon for every 100 they spend on groceries.
Frank Curci, Tops' president and chief executive officer, said the chain's gas rewards program had a "measurable increase" in enrollment by its customers. Tops views gasoline sales as a way to build customer loyalty and also attract shoppers to its stores.
Tops, which took over 21 former Grand Union supermarkets in upstate New York and Vermont during the final week of the third quarter, said those sites contributed 2 million to its sales.
Excluding gasoline sales, revenues from inside Tops' stores slipped by less than 1 percent to 487.5 million, compared with 490.9 million a year ago. The decline also reflects the shutdown during the second half of 2011 and January 2012 of five stores, with 3.5 million in third-quarter 2011 sales, that Tops acquired from Penn Traffic.
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