NORFOLK, Va. -- Farm Fresh here said the acquisition of nine former Safeway stores in Richmond, Va., last December helped boost sales 20.2% in the second quarter ended June 18.
rter, an increase of 1% from $9.9 million in the year-ago quarter. For the 24-week first half, cash flow declined 8.6% to $17 million. Farm Fresh, which operates 66 stores, reported a net loss of $4.2 million for the quarter.
Same-store sales increased 4.8% for the quarter.
Michael E. Julian, president and chief executive officer, said changes in operating results are attributable "primarily to increased promotional markdowns, advertising and other expenses" associated with the grand openings of the former Safeways.
Higher interest expense and increased rent expense also contributed to the lower earnings and cash-flow results, the company said.
"We are extremely pleased with our sales trends companywide," Julian said. "Our core combination-store business and discount store division are performing well. Losses in the Richmond division attributable to the Safeway transaction were significantly lower in the second quarter than in the first, and we expect continued progress in the months ahead."
Ken Bann, a high-yield analyst with Bear Stearns, New York, said the flat cash-flow results indicate it's taking longer than expected for the Richmond acquisition to begin benefiting earnings.
"Farm Fresh is certainly generating enough sales from that operation, but nothing is falling to the bottom line because of the costs of reopening and promoting those stores and the resulting reductions in gross margins," Bann said.
