Deflation, Economy Impact AG-Baton Rouge Sales

Associated Grocers was able to produce some modest market-share gains in the most recent fiscal year, despite a 2.6% decline in sales, according to reports.

BATON ROUGE, La. — Associated Grocers was able to produce some modest market-share gains in the most recent fiscal year, despite a 2.6% decline in sales, according to reports.

The wholesalers' sales for the year ended that May 28 fell to $678 million, due to heavy trading down by customers and a 2.1% impact from deflationary pricing, which also pressured margins, said a source, who asked not to be identified.

Profits were up because AG was able to reduce labor costs by eliminating most overtime following the loss of Rouse's Enterprises [3], which had been its largest member.

Going into the new fiscal year, however, there are several concerns, because of the oil spill and its impact on fisheries and off-shore drilling. It's still too early to tell what the full impact of the oil spill will be on AG's business, sources pointed out, though the company is reportedly seeing an initially positive sales impact because of increased demand from the response crews. However, there is still a risk the local economy could suffer as a result of damages to the fishing and tourism industries, they said.

However, because AG is virtually debt free, its strong balance sheet and liquidity, including an untapped $15-million revolver, should provide ample cushion for any potential short-term capital shortfalls, observers said.

Rouse's Enterprises, Thibodaux, La., left AG several months after acquiring 19 Sav-A-Center stores from A&P. That contributed to a drop in AG sales from $800 million in fiscal 2008 to $696 million in fiscal 2009.