Tops Holding Corporation Reports Net Income of $9.5 Million in Second Quarter 2012

WILLIAMSVILLE, N.Y.--(BUSINESS WIRE)--

Tops Holding Corporation (Tops or the Company), the parent of Tops Markets, LLC, a leading supermarket retailer with 125 corporate and 5 franchise locations serving Upstate New York and Northern Pennsylvania, today reported financial results for the second quarter of fiscal 2012 (12-week period ended July 14, 2012).

This was a strong quarter for Tops, with improved margins, sharply higher profitability and strong cash generation," said Frank Curci, Tops President and CEO. "We are encouraged by our current trends and expect to build on this momentum throughout the remainder of the year as we continue promotional and marketing initiatives tailored to meet the shopping needs of our customers.

On July 19, 2012, the Company announced an agreement with GU Markets LLC, an affiliate of C&S Wholesale Grocers, Inc., to acquire 21 supermarkets in Upstate New York and Vermont. The transaction is expected to close during the fall of 2012, and is subject to customary closing conditions. The acquisition is expected to be fundedusingcash on hand.

Mr. Curci noted, We believe this transaction is a natural strategic complement to our current footprint, and given our successful integration of the former Penn Traffic supermarkets, we are confident in our ability to seamlessly integrate these 21 supermarkets.

Second quarter 2012 financial results highlighted by improved margins and significantly higher net income

Net sales of $562.4 million in the second quarter of fiscal 2012 were up slightly from net sales of $559.5 million in the fiscal 2011 second quarter (12-week period ended July 16, 2011).

Inside sales of $509.1 million were up 0.3%, or $1.7 million, from the prior-year second quarter, and reflect a 1.6% increase in same store sales. The increase in same store sales was largely attributable to the timing of the Easter holiday and our Monopoly marketing promotion. The week following Easter, historically a very poor sales week, occurred during the 2012 first quarter versus the 2011 second quarter. Additionally, there was a change in timing of our Monopoly marketing promotion, which ran from April through July in 2012, compared with January through April in 2011. Inside sales were negatively impacted by a significant decline in pharmacy sales, largely the result of the recent conversion of certain drugs from being brand only to having generic equivalents. This conversion had an estimated 50 basis points impact on same store sales. Inside sales were also impacted by the sale or closure of five of the acquired Penn Traffic supermarkets during the second half of 2011 and early January 2012 that contributed $9.8 million of inside sales during the second quarter of 2011.

Gasoline sales increased 2.1%, or $1.1 million, to $53.2 million in the second quarter of 2012 compared with the second quarter of 2011 resulting from a 5.5% increase in the number of gallons sold, which was primarily due to the addition of five new fuel stations since July 2011. This was partially offset by a 3.2% decrease in the retail price per gallon.

Gross profit for the second quarter was $160.3 million compared with $155.0 million in the prior-year period, an improvement of 80 basis points to 28.5% from 27.7%. The Company experienced a change in non-cash LIFO inventory valuation adjustments from expense of $2.8 million during the second quarter of 2011 to income of $1.4 million during the second quarter of 2012. Excluding the impact of LIFO adjustments, gross margin increased 10 basis points to 28.3% in the second quarter of 2012, reflecting a continuation of pricing improvements commenced in 2011, promotional spending changes and sales mix.

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Tops Holding Corporation Reports Net Income of $9.5 Million in Second Quarter 2012