Tops reports record sales in 2013

Tops Holding II Corporation ("Tops"), the indirect parent of Tops Markets, LLC ("Tops Markets"), a leading supermarket retailer serving Upstate New York, Northern Pennsylvania and Vermont, today reported financial results for the fourth quarter and full year ended December 28, 2013. Included in the results are the 21 supermarkets acquired from GU Markets LLC in October 2012, all of which were rebannered to Tops stores in 2013, seven independent supermarkets acquired since December 2012 and four new supermarket openings since July 2012.

"Fiscal 2013 was a year of continued growth and change," commented Frank Curci, Tops President and CEO. "We achieved record sales, expanded our footprint with the successful integration of 28 acquired supermarkets and further strengthened our existing portfolio with two new store openings, including the opening of our new speciality and gourmet food store, Orchard Fresh. We also announced and completed the acquisition of Tops by the current senior management team in December. We believe the return to local ownership provides added flexibility as we continue to grow and build on our past successes."

Net sales increased 2.0%, or $11.1 million, to $571.3 million in the fourth quarter of 2013 from the prior-year period. Inside sales increased 2.7%, or $13.8 million, to $524.2 million from the 2012 fourth quarter, and reflect the incremental contribution of $13.9 million from seven acquired supermarkets and two new supermarkets opened since December 2012. Same store sales were flat and were negatively impacted by the cannibalization of sales from new and acquired locations as well as sluggish economic conditions in areas of Tops' footprint. Helping mitigate those impacts were targeted marketing and promotions aimed at driving organic performance and increasing foot traffic.

Gross profit for the fourth quarter was $159.9 million, or 28.0% of net sales, compared with $154.5 million, or 27.6% of net sales, in the 2012 fourth quarter. The 40 basis points increase in margin was mainly due to a mix as a larger portion of the recent period's sales were from higher margin inside sales.

Total operating expenses in the 2013 fourth quarter were $162.7 million, or 28.5% of net sales, compared with $147.3 million, or 26.3% of net sales, in the prior-year period. This increase reflects Tops' expansion and $15.8 million in transaction costs associated with the December 2013 management purchase of Tops (see "Management Purchase" below for details). As a result, Tops recorded an operating loss of $2.8 million during the fourth quarter of 2013 from operating income of $7.2 million in the 2012 fourth quarter.

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