MINNEAPOLIS -- It looks as though the turnaround project now under way at Nash Finch Co. here won't be trumped by a quick sale of the wholesaler.
At last week's annual shareholders' meeting here, a proposal that would have called on the company's board "to arrange for the prompt sale of Nash Finch Co. to the highest bidder" was trounced by a shareholder vote.
Indeed, a quick sale of Nash Finch had been under consideration by the wholesaler's management, but management rejected the idea as it now has been by shareholders. So the work on revamping the company continues. "We're excited about the opportunity to create a tremendous amount of shareholder value," Ron Marshall, Nash Finch's president and chief executive officer, told the meeting.
A year ago, the company's stock was trading at about $18 per share. It hit a 52-week low of $6.87 in February, but has since rebounded slightly to about $10. As was reported earlier, results of fiscal 1998 were driven downward by a 4.2% drop in sales, coupled with special charges such as those associated with discontinued operations. Net income went into negative territory by $61.6 million as compared with a loss of $1.2 million the previous year.
But that wasn't all that has happened lately: The wholesaler faced problems with Y2K compliance, which forced the company to ditch the multiyear development of its Horizons information system, and to absorb a $34 million charge.
Marshall, who joined the company about a year ago, has compiled a list of additional problems, such as its cumbersome decentralized buying practices, its ineffective private-label program, the absence of a clear retail strategy, its above-average product-acquisition costs, a distribution system operating at just 60% capacity, and a general lack of accountability. "No one really had accountability for anything," Marshall told shareholders.
Now that problems have been identified, management will devote the balance of this year to stabilizing the company, with an eye toward rebuilding the foundation and growing the business in the next couple of years, Marshall said.
He said, "1999 will be a year of transition -- likely the kind with two steps forward and one back."
The company's broad plan calls for focusing on its core business of food wholesaling and retailing in the Midwest and Southeast. Nash Finch gets about 24% of its revenues as a supplier to the U.S. military, but Marshall said he does not see that segment as a growth vehicle.
The action, he said, will come in the retail sector. Nash Finch is expanding its retail holdings, as are many wholesalers.
The company, which already owns 90 supermarkets in 12 states, said earlier this month it would acquire 18 stores in Minnesota and Wisconsin under the banners of More-4 Stores, Econofoods, Food Bonanza and Erickson's City Market.
Currently, sales from corporately owned stores account for 18% of revenues, compared with 57% from wholesale. The goal is to achieve a more balanced mix. Efforts at improving the retail sector include paring the number of banners from 17 to four.
Marshall said some efforts to change the company already show signs of paying off.
Inventory levels are down 11% from a year ago and comparable-store sales for this year's first quarter were up 2%.