RICHMOND, Va. -- Richfood Holdings here said last week it expects earnings to rise 14%-16% for the fourth quarter ending May 1 -- considerably below analysts' expectations of 30%.
startup expenses associated with its 10 Pack 'N Save limited-assortment store operations, which the company said are still in the developmental stage, and a later-than-planned sale of Trak Auto, scheduled to close in the first quarter of the new fiscal year, plus related paydown of debt, which negatively impacts interest expense. Richfood said it will release fourth-quarter financial results in mid-June.
Gary Giblen, New York-based managing director of NationsBanc Montgomery Securities, San Francisco, told SN analysts were lowering their earnings expectations to 52 cents per share instead of 58 cents for the quarter.
"But most of the factors behind the earnings shortfall have nothing to do with Richfood's core, ongoing business, which is very positive," Giblen said. "With Y2K, it's hard to predict the amount of spending or the timing it's going to occur, and that's certainly a once-a-millennium issue. Trak Auto took longer to sell than anticipated, and while the startup costs for Pack 'N Save are of some relevance, that is also a nonrecurring charge."
A 12% drop in Richfood's stock price earlier this month was unjustified, Giblen added, "because the outlook for the year ending in April 2000 has hardly changed at all, and this is one of those short-term events that won't be important in a few months."
"Richfood is getting better results from its two retail acquisitions [Farm Fresh, Norfolk, Va., and Shoppers Food Warehouse, Lanham, Md.], and there is at least a reasonable hope it can retain the business of Giant Foods of Carlisle, Pa,"said Giblen.