American Stores Co.'s acquisition of Lucky Stores Inc. raised sales dramatically but depressed first quarter earnings, the company reports.
First quarter net earnings of $21.51 million, or 57 cents per common share, were down from $27.05 million, or 69 cents per common share for the same period last year. Sales of $5.21 billion in the first quarter represented a 44.85 percent increase over the first quarter of 1988.A spokesman said the Lucky acquisition, as expected, reduced first quarter net earnings per common share by 26 cents. Sales from stores owned by American last year increased 6.68 percent for the first quarter over the same period last year.
Also in the first quarter, American recorded a net gain on the sale of assets, including certain leasehold interests. Those non-recurring gains contributed 21 cents per common share.
In addition, the last in first out (LIFO) charge to earnings in the first quarter of 1989 decreased earnings per common share by 33 cents, compared with 18 cents in the prior year's first quarter. Accordingly, comparable earnings per common share, adjusted for these three items, increased to 95 cents in 1989, compared with 87 cents in 1988.
Operating profit was $131,547,000, or an increase of 75.99 percent, compared with $74,747,000 reported in the prior year's first quarter. The spokesman said results of operations for the prior year do not include the operations of Lucky, which was acquired in June 1988.
"While the Lucky acquisition has temporarily impacted earnings due to increased interest expense associated with the acquisition, we were pleased with the performance of all of our companies," said J.L. Scott, vice chairman and chief executive officer of American Stores.
"We are particularly pleased with our strong operating profit in light of the fact that the pre-tax LIFO expense for the first quarter of 1989 was $16.5 million, compared with $9.12 million in the first quarter of 1988.
Scott said the company's grocery and combination store pre-LIFO operating profit increased 193.25 percent to $127.32 million from $43.41 million in 1988.
Adjusted for Lucky's operations, Scott said the company's grocery and combination store operating profit increased 32.56 percent with all of its grocery and combination store regions turning in improved performances over the prior year. The largest improvements were turned in by Lucky Stores and American Food and Drug.
Offsetting strong gains in the grocery operations, said Scott, American Drug Stores' pre-LIFO operating profit was negatively impacted by promotional costs associated with changing the name of its California drug stores from Osco to Sav-On.
Average common shares outstanding for the year were 30.24 million in the first quarter of 1989, and 30.13 million in the prior year. Preferred dividends for the first quarter amounted to $4.29 million in 1989 and $6.29 million in 1988.
The company said the lower preferred dividends reflect the company's retirement of its preferred B shares Aug. 15.