FRESH BRANDS TO FOCUS ON WHOLESALE

SHEBOYGAN, Wis. -- Fresh Brands here said it was returning to its roots. The company will shift its focus back to seeking growth as a full-service wholesaler to its franchisees rather than trying to increase revenues through retail acquisitions.During a conference call to discuss results for the fourth quarter and fiscal year ended Jan. 3, John Dahly, chief financial officer, said, "This was our successful

SHEBOYGAN, Wis. -- Fresh Brands here said it was returning to its roots. The company will shift its focus back to seeking growth as a full-service wholesaler to its franchisees rather than trying to increase revenues through retail acquisitions.

During a conference call to discuss results for the fourth quarter and fiscal year ended Jan. 3, John Dahly, chief financial officer, said, "This was our successful strategy for many years prior to 2000." Dahly became the company's CFO in December, a position he had retired from in 2001.

Fresh Brands is currently conducting a search for a new chief executive officer, following the November departure of Elwood Winn, who had been CEO since 2000 and acting CFO since September. Under Winn, the company sought to grow by acquiring one or two small chains a year, a strategy that resulted in only one deal -- the 2001 acquisition of Dick's Supermarkets, an eight-store chain.

Dahly told conference call participants that Fresh Brands now intends to place "a greater emphasis on improving the results of its current operations" and on fixing "what went wrong with the company under the past administration."

As part of this effort, the company said it would close five underperforming corporate stores -- three in Wisconsin (Appleton, Oshkosh and Racine) as well as two in Illinois (South Elgin and Algonquin) -- and one underperforming franchised unit in Fort Atkinson, Wis. The closings will result in an after-tax charge of $5.8 million, according to Fresh Brands.

In all, the company announced $10.8 million in after-tax charges for such items as the store closings, $2 million in uncollectible franchisee receivables, and a $1.4 million write-off related to financial reporting and accounting software purchased in 2000 that Fresh Brands has decided not to use.

Lewis Stinebaugh, the company's executive vice president for operations, said Fresh Brands is developing "a comprehensive marketing proposition" to enable it to compete better against rivals "whose sole focus is on price."

Like Dahly, Stinebaugh assumed his current position with Fresh Brands in December. Previously, he was president of the Milwaukee division for Fleming, Dallas.

"We're going to focus on being a full-service wholesaler," he said. "We want to be the program of choice for any independent who wants to survive."

David Livingston, a Pewaukee, Wis.-based retail consultant, told SN the company's best chance for success is to stay close to its small-town roots.

"Fresh Brands is still the premier wholesaler in Wisconsin for servicing smaller, rural one-store communities," Livingston said. "They can improve sales with added offerings, such as pharmacy and fuel. I would also expect to see several small, rural stores begin converting their business to Fresh Brands."

In the 13-week quarter, sales rose 13.2% to $16.5 million, and comparable-store sales increased 11.9%. However, the company had a net loss of $4.7 million, or 96 cents per share, vs. a net income of $2.8 million, or 54 cents a share, in the previous year's fourth quarter.

In the 53-week fiscal year, sales were up 6.3% to $658 million, and comps grew 3.6%. Yet, the company had a net loss of $473,000, or 9 cents per share, vs. a net income of $8 million, or $1.54 per share, in fiscal 2002.

4th-Quarter Results

Qtr Ended*: 1/3/04;12/28/02

Sales: $165.5 million;$146.2 million

Change:+13.2%

Comp-store: +11.9%

Net Income:($4.7 million); $2.8 million

Inc/Share: (96 cents); 54 cents

52 Weeks*: 2003; 2002

Sales: $658 million; $619.1 million

Change: +6.3%

Comp-store: +3.6%

Net Income: ($473,000); $8 million

Inc/Share: (9 cents);$1.54

*In fiscal 2003, Fresh Brands had a 13-week fourth quarter and 53-week fiscal year, vs. a 12-week fourth quarter and 52-week fiscal year in fiscal 2002.