Evening star., 1939-06-08
Substantial Income
Gains Predicted
For Grocery Chains
Rote Of Earnings
Probably Will Be
Slower in Second Half
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, June 8.-Grocery
chains will report substantial in
come gains for the current six
month period, for volume is larger
and profit margins are wider than
year ago, according to new an
alysis in Poor's Industry and Invest
ment Surveys. The rate of earnings
progress will probably be slower
during the second half because
wholesale food costs are likely to
average higher in relation to retail
prices than at present. and sales
gains will be less marked.
The sharp improvement which
characterized chain operations dur
ing the closing months of 1888 be-
came even more marked during the
March quarter of this year" con-
tinues the analysis. Dollar sales
for the latter period were 35 per
cent higher than year earlier. And
since this business was transacted
at lower price level, the gain in
tonnage volume was even greater.
This factor, taken in conjunction
with a very favorable wholesale-re-
tail price relationship. resulted in
rapidly expanding earnings for the
industry. Combined net income of
four important systems was three
times as large as in the opening
1888 quarter.
Fare Well in Quarter.
so far this quarter, grocery
chains have Jared as well as in ear
her months and results for the full
period will compare about as favor
ably as in the three months ended
IN March However, the rate of gain
in sales volume over a year ago is
likely to be narrower in coming
months, for the comparison will
soon be made with a period of 1898
when business was beginning to ex-
pand.
Furthermore, there is reason to
believe that wholesale food prices
will work higher as the year
progresses, for the general economic
outlook shows signs Of improvement.
This would operate to shrink profit
margins. for retail prices cannot
usually be adjusted quickly enough
to keep pace with costs. However,
there is no cause yet for anything
but a bullish attitude toward the
industry improvement will con-
tinue, though gains will not be so
sharp as they have been in the past.
The tendency to consolidate sew
eral small stores into one large mar
ket continues though the number
of such conversions is tapering of
gradually. The reason, of course,
is the rapid pace with which super
markets have sprung up during the
last two years or so. The Great
Atlantic & Pacific Tea Co., for ex-
ample, operates close to 1000 such
markets today; two years ago it had
out a handful
Held Turning Point.
The current year may well be
recorded as the turning point of
the wave of discriminatory chain
store taxes which has swept the
country since the early days of the
great depression. There have been
few municipal tax ordinances en-
acted, but such unfavorable develop
ments have been far outweighed by
the invalidation of Pennsylvania
and Kentucky statutes and the re-
fusal of several State Legislatures
to enact new measures.
That the public favor has swung
over to the chains is seen in the de-
sertion of many hackers of Repre-
sentative Patman's proposed Federal
chain tax, which now seems headed
for the pigeon hole or defeat. The
pro and con arguments brought
forth by this measure have done
much to sell the chains to the
public. And politicians are quick
to sense changes in sentiment of
the constituents hack hoYne'"