Tastykake May Close N. Philly Bakery

Philadelphia (AP) - May 11, 2006 -- Tasty Baking Co., maker of the Tastykakes line of snacks, said Thursday that it is considering closing its bakery in North Philadelphia as part of the company's turnaround plan.

The beloved Philadelphia-based firm said it is evaluating its manufacturing operations. Its options include upgrading its aging bakery in the Nicetown section of the city; enhancing the use of its other bakery, which is located in Oxford, Pa.; or relocating some operations to a new plant.

The company said one possibility is to close the Philadelphia facility and move its operations outside the city, though it said it would prefer to stay.

The company employs around 1,100 people, most of whom work at the two bakeries.

Charles Pizzi, president and chief executive of Tasty Baking, said in a statement that "improving manufacturing capability will enhance the company's competitive position."

Tasty Baking is in its third year of a restructuring to turn around a lackluster business.

"It's a tough business," said Mitchell Pinheiro, an analyst with Janney Montgomery Scott who owns the stock. "People aren't eating more snack cakes."

He said the decades-old Philadelphia plant could use an upgrade. In contrast, the Oxford facility is more modern and was bought by Tasty Baking in 1997 after being vacated by Keebler Co.

"It's going to be very difficult to ring out more efficiencies" at the older bakery, the analyst said.

Pinheiro said Tasty Baking's strategy is "fixing their core business in their core markets and expanding to adjacent markets in a disciplined manner."

The company's products are sold mainly in Pennsylvania, Delaware, Maryland, New Jersey, New York, Ohio and Virginia.

As for becoming a national brand, "they'd like a national presence, but done only with profitability," the analyst said.

For 2006, management is concerned that higher energy prices will cut into earnings, according to a research report by analyst Terry Bivens of Bear Stearns.

Bivens said Tasty Baking's sales were affected by a slowdown in convenience store traffic late last year. As gas rises above $3 a gallon, the same problem could occur again, he said.

In 2005, Tasty Baking reported gross sales of $278 million.

Shares of Tasty Baking rose by 5 cents to $9.08 in midday trading on the Nasdaq.

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