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" We reported sales and earnings results for the third quarter that were at the upper-end of our guidance,” said Howard R. Levine, Chairman and CEO. “Our consumables sales remained strong and we continued to gain market share. However, our discretionary sales remained challenged as our customers have been forced to make spending choices between basic needs and wants. Consistent with market trends, we expect that our customers will continue to face financial headwinds. We are adapting accordingly, and we are focused on stabilizing gross margin, controlling expenses, improving inventory productivity, and driving greater operational efficiencies. I am confident that we remain well positioned for long-term profitable growth.”
Fiscal 2013 Third Quarter Results
Net sales for the third quarter ended June 1, 2013, increased 9.0% to $2.57 billion from $2.36 billion in the third quarter of fiscal 2012 ended May 26, 2012. Comparable store sales in the quarter increased 2.9%. The increase in comparable store sales was a result of an increase in the average customer transaction value and higher customer traffic. Sales were strongest in the Consumables category, which increased 14.8% during the quarter, driven primarily by strong growth in food, health and beauty aids, and tobacco.
Gross profit for the quarter increased 5.6% to $892.5 million, or 34.7% of net sales, compared to $845.3 million, or 35.8% of net sales, in the third quarter of fiscal 2012. As a percentage of sales, the impact of stronger sales of lower-margin consumables, increased inventory shrinkage and higher markdowns was partially offset by higher purchase markups and lower freight expense.
Selling, general and administrative expenses, as a percentage of net sales, were 27.4% in the quarter compared to 27.6% in the third quarter of fiscal 2012. As a percentage of net sales, lower advertising and distribution center costs were offset by higher store occupancy costs and store payroll.
The effective income tax rate in the quarter was 36.2% as compared to 35.8% in the third quarter of fiscal 2012. The increase in the effective tax rate was due primarily to changes in uncertain tax positions, partially offset by higher federal tax credits and foreign tax benefits associated with the Company’s global sourcing efforts.
Net income for the quarter was $120.9 million compared to net income of $124.5 million for the third quarter of fiscal 2012.
The Company’s merchandise inventories at June 1, 2013, were $1.47 billion compared with $1.39 billion at May 26, 2012. Average inventory per store at the end of the quarter was 1.0% lower than the average inventory per store at the end of the third quarter of fiscal 2012.
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