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Fay's income up 6.7% on 17.2% sales gain.

Fay's income up 6.7% on 17.2% sales gain

LIVERPOOL, N.Y. - After applying an extraordinary charge to account for early retirement of debt, Fay's Inc. reported a 6.7% earnings gain on a 17.2% jump in sales during fiscal 1991, ended January 26. Fay's recorded net profits of $11.1 million during the 52 weeks, compared with $10.4 million in fiscal 1990. Volume, buoyed by an 8.9% same-store sales increase, reached $672.6 million from $574.1 million. Full-year earnings for the operator of drug, auto parts and stationery outlets would have been considerably higher had it not decided to redeem and make open market buys of its 13.8% subordinated debentures, due 2005. By purchasing $27 million worth of those securities, Fay's assumed a $1.24 million extraordinary charge, which cut into its $12.3 million after-tax profits. That total represented an 18.3% improvement from the previous year.

Comparisons were also impacted by a very low tax rate of 34.8% that was applied during fiscal 1990, at which time Fay's utilized capital-loss carryforwards. Consequently, pre-tax profits rose 29.6% to a record $20.6 million from $15.9 million.

During the fourth quarter Fay's earnings jumped 43.5% to $5.05 million from $3.25 million, as sales rose 17.9% to $190.7 million from $161.7 million. Comparable-store sales advanced 7.5%. Pretax, profits skyrocketed 67.4% to $8.57 million from $5.12 million.

Commenting on his company's performance, chairman Henry Panasci Jr. says, "We are very pleased with our results for both the fourth quarter and the year. We achieved excellent comparable-store gains, while showing improvement in gross margins and operating expense ratios. The current economic situation has not dampened our expectations. We feel confident that our momentum in sales will continue and further improvement in expense ratios is possible."

Fiscal 1991 was a busy expansion year for Fay's, which expanded on all of its retail fronts. The chain opened nine super drug stores, nine Paper Cutter units and two Wheels discount auto supplies outlets. Moreover, the chain acquired 15 drug stores, while closing one, giving it 197 of these outlets in New York and Pennsylvania.

Just 11 days after the close of its fiscal year, Fay's announced that it had entered into an agreement in principle to purchase the capital stock of Carls Drug from Victory Markets Inc. This transaction would add up to 48 drug stores in central, southern and northern New York to Fay's roster.

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Publication:Chain Drug Review
Date:Apr 8, 1991
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