NORFOLK, Va. -- A public stock offering is one option Farm Fresh here may consider in the future as it attempts to raise equity and pay down debt, Michael E. Julian, chairman and president, said last week.
ncial officer of the chain.
Alessi left Farm Fresh about two and a half years ago when he opted to buy, in a joint venture with Citicorp, a group of conventional stores Farm Fresh was spinning off. He has remained a director of Farm Fresh, however, while operating the 12-unit Virginia Supermarkets chain.
"As the business starts to operationalize better results, we need to make strategic decisions about raising equity and dealing with the leverage to position the company for the next four or five years," Julian said of the move to rehire Alessi. "And we felt we needed someone who's tops on the financial side of the business."
Farm Fresh remains a highly leveraged company, Julian said, with $300 million in debt in the operating company and $60 million more in a holding company.
Alessi's decision to rejoin Farm Fresh led to the resignation of Tim Kullman, who had been the chain's chief financial officer for the past four years.
"Tim did an extraordinary job on several refinancings," Julian told SN, "but he understood that hiring Alessi meant there would be someone above him dealing with finances and he wanted to find an opportunity where he would be the No. 1 financial guy."
Julian said he met Alessi years ago while working as a consultant for Certified Grocers of Illinois, where Alessi was chief financial officer. Alessi maintains his equity interest in Virginia Supermarkets, though he has removed himself from day-to-day operations, Julian said. Heath Little is the new president of Virginia Supermarkets. Little was the chain's meat and general merchandise buyer.
Julian said Virginia Supermarkets is not really a competitor to Farm Fresh "because its stores are smaller, and they are located in older neighborhoods where we are not in direct competition."
Despite some concerns among Wall Street securities analysts who follow the company, Julian said Farm Fresh's operations are going well. "All stores are getting better every quarter," he said. "Our core units [in the Tidewater area of Virginia] are doing well and the Rack & Save warehouse units are doing well after a difficult startup. And all stores are moving into higher levels of profitability."
Second-quarter financial results, which will be announced this week, will show increased total sales and same-store sales will be up "more than the 2% increase reported in the first quarter," Julian said. He declined to discuss the company's earnings.
During the 12-week first quarter ended Feb. 26, Farm Fresh reported a sales increase of 24% to $196 million -- which reflected the acquisition of Safeway's 15 Richmond-area stores in December. Cash flow, however, dropped almost 20% in the quarter from $8.7 million to $7 million.