EAGLE SALES DIP, BUT EARNINGS SOAR

MILAN, Ill. -- While declining to comment on trade reports saying the company is for sale, Eagle Food Centers here said last week that sales fell and earnings rose for the first quarter ended May 3.Eagle executives told SN the company would not comment on speculation that it is on the selling block. Robert J. Kelly, president and chief executive officer of the 92-store chain, was quoted in a local

MILAN, Ill. -- While declining to comment on trade reports saying the company is for sale, Eagle Food Centers here said last week that sales fell and earnings rose for the first quarter ended May 3.

Eagle executives told SN the company would not comment on speculation that it is on the selling block. Robert J. Kelly, president and chief executive officer of the 92-store chain, was quoted in a local newspaper saying the company was not involved in any negotiations to sell.

Amid the speculation, Eagle officials told SN they are looking at potential store sites within the city of Chicago, which would represent an expansion into new territory.

The company also said it is negotiating for five sites within the greater Chicago area, though any eventual store construction on those properties would be at least a year away. The company said net income was up 74.1% to $1.8 million for the quarter, while sales fell 3.3% to $239.9 million and same-store sales declined 4.1%.

Kelly said the company attributes the earnings increase to higher gross margins as a percentage of sales "due to better buying practices and lower expense levels. And we continue to see opportunities to improve our internal operations and are looking to system improvements in the second half of the year to help us reduce operating costs further."

Kelly also said the sales drop was due to five competitive openings, "although our affected stores have responded very well."

Herb Dotterer, senior vice president and chief financial officer, said Eagle's ability to meet the competitive activity "proved better than we had anticipated, so we're pleased with our defensive posture."

According to Kelly, Eagle is on schedule to begin installing a new information system on July 14, with implementation targeted for Oct. 15.

A labor scheduling program at store level has already reduced hours in the stores' meat departments by 15,000 hours a week during the first quarter, Kelly said, although he also acknowledged that part of the reduction was due to the drop in sales.

Eagle has been able to reduce inventories by $9 million over the past year, with another $4 million to $6 million reduction likely once the new systems are implemented, Kelly noted.

"To reduce inventories, we've gone to a minimum of three deliveries per week on all products and made it clear that we want our store backrooms empty except for promotional merchandise," Kelly explained.

"That has not had any impact on stockkeeping units or holding power, and our service levels from the warehouse to the stores are comparable to what they were a year ago," he said.

1ST QUARTER RESULTS

Qtr Ended 5/3/97 5/4/96

Sales $239.9 million $248.1 million

Change -3.3%

Same-store -4.1%

Net Income $1.8 million $1.0 million

Change +74.1%

Inc/share 16 cents 9 cents