August 9, 2011 / 5:54 PM / 7 years ago

UPDATE 2-Pantry reports bleak Q3 on high gas prices, shares plummet

* Q3 adj EPS $0.93 vs est $1.22

* Q3 rev up 19 pct at $2.26 bln vs est $2.33 bln

* Sees FY gross merchandise margins 34.0-34.2 pct

* Expects FY merchandise sales of $1.78-$1.80 bln

* Shares down as much as 26 pct (Adds conference call details, updates share movement)

Aug 9 (Reuters) - Pantry Inc’s quarterly profit missed Wall Street expectations as higher retail gas prices reduced foot traffic at its convenience stores, sending its shares to a three-year low.

Comparable store merchandise sales in the third quarter decreased 1.5 percent, as gross margin on its merchandise sales fell 20 basis points to 34.0 percent.

“Comp sales were negatively impacted in general by a low single-digit decline in foot traffic in the first half of the quarter,” Chief Executive Terrence Marks said on a conference call with analysts.

Retail fuel gallons declined 6.9 percent in the April-June quarter on account of high gas prices. However, overall fuel revenues grew 25.3 percent to $1.8 billion, as the average retail price per gallon increased 34 percent to $3.69.

Fuel gross profit of $80.1 million was hurt by a $5.4 million year-over-year increase in credit card fees.

For the full year, Pantry, which competes with stores owned by Couche-Tard Inc (ATDb.TO) and Seven Eleven , lowered the upper end of its merchandise gross margins and also cut its merchandise sales forecast for the year.

Cary, North Carolina-based Pantry now expects gross merchandise margins in the range of 34.0-34.2 percent and merchandise sales of $1.78-$ 1.80 for the full year.

Net income for the quarter rose to $19 million, or 84 cents a share, compared with market expectation of $1.22 per share.

Shares of the company were trading at $11.72 Tuesday afternoon on Nasdaq. They hit a low of $11.07 earlier in the day. (Reporting by Meenakshi Iyer in Bangalore; Editing by Joyjeet Das, Maju Samuel)

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