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Pathmark Stores, one of the US’s top 25 retailers of groceries, has reported
its results for Q4 and full-year fiscal 2002, saying that sales for the year
dipped by 0.6% to reach USD3.94 billion. Same-store sales slid by 1.7% over
the course of the year. The company, which trades through 144 superstores in
New York, New Jersey, Pennsylvania and Delaware, was pleased to announce a return to profitability, with net profits of USD13.3 million in 2002
compared to net losses of USD242.0 million in the previous year. During the
year, Pathmark opened seven new outlets (of which three were replacements),
closed one and remodeled 11. Chief Executive Officer Eileen Scott stated
that: "Our focus throughout the past year on cost control, productivity
improvements and high-priority capital investments while improving market
share, has positioned us well for fiscal 2003.‰

Three new outlets (including one replacement) are scheduled for fiscal 2003,
along with one closure and 16 renovations. Pathmark noted that ˆ thanks to
ongoing weakness in the US economy coupled with strong competition ˆ it is
expecting same-store sales growth of between 0% and 1%.

These are perfectly respectable results in the current US grocery retail climate, even more so when one considers that the business was the subject of a thwarted takeover in 1999 and on the brink of collapse in 2000. Having exited Chapter 11 protection in late 2000, Pathmark appears to be enjoying a new lease of life, picking up stores from Grand Union, A&P, Foodtown and Shoprite, and even launching an audacious approach for the 32-strong bankrupt supermarket chain Big V Supermarkets. The company sailed through the wave of concern that greeted the October 2002 flight of President and CEO Jim Donald to ubiquitous coffee shop operator Starbucks, replacing him with the internal promotion of Eileen Scott from her post of EVP Store Operations. With the general trend of retailers looking towards expensive external candidates to fill vacant positions, the appointment of Pathmark stalwart Ms Scott is to be applauded.

Despite this solid performance, some of the more interesting news concerning
Pathmark has not been of its own making. It was revealed in March that an
investment consortium including Canadian conglomerate Jim Pattison Group and Anthony Federico, a vice president at Ingles Markets Inc., had amassed a
6.6% stake in Pathmark as an investment. While Jim Pattison‚s accumulation of Pathmark shares is not currently expected to herald a full takeover bid, the long term potential for such a move is certainly there. Jim Pattison, which includes businesses as diverse as 'haunted house' theme parks, sign
manufacturing, newspapers and aquaria, is also one of ten largest food and drug retail groups in Canada. Dominated by the likes of Loblaw, Sobeys, Safeway, A&P, Metro Inc., Costco and Wal-Mart, the Canadian sector is crowded and competitive to say the least, and James Pattison is no doubt keen to explore opportunities on the other side of the border.

The Jim Pattison Group is the third-largest private company in Canada, and it is possibly a fair assumption to conclude that it has a decent amount of cash to play with as regards a possible move into the US grocery sector. As importantly, its retail expertise is extensive and includes the successful Save-On-Foods chain and the highly acclaimed Urban Fare gourmet superstores. At the time of writing, Pathmark‚s shares are trading a long way away from their 52-week high, and the company has a market capitalisation of just USD206 million. Is Pathmark a bargain that is too good to pass up?
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