Nash Finch Posts Q3 Sales Declines

MINNEAPOLIS Nash Finch Co. here last week said that the minimal food-price inflation that has occurred recently does not appear to be helping drive sales volumes. The consumer reacts differently to rising prices in a recession than the consumer does in good times, said Alec Covington, president and chief executive officer, Nash Finch, in a conference call discussing third-quarter results. In the case

MINNEAPOLIS — Nash Finch Co. here last week said that the minimal food-price inflation that has occurred recently does not appear to be helping drive sales volumes.

“The consumer reacts differently to rising prices in a recession than the consumer does in good times,” said Alec Covington, president and chief executive officer, Nash Finch, in a conference call discussing third-quarter results. “In the case of the difficult environment that we're in now, increases in retail prices stemming from inflation only further drive the consumer to shop down, as opposed to a good environment with high employment where people might otherwise accept those price increases. They just will not accept those price increases now.”

Instead, consumers have been under increasing pressure to buy more private label and shop for sale items and use coupons.

“So inflation doesn't really give the benefit to the top line, at least in our view, in this economic environment that we would have seen in an otherwise normal economic environment because the consumer still only has ‘X’ amount of dollars to spend from the grocery budget,” Covington said.

He attributed much of 10.7% decline in retail and distribution sales for the third quarter, which ended Oct. 9, to the loss of a group of Piggly Wiggly stores as a customer in the Southeast and to declining sales at existing wholesale customers. The company has also closed four corporate stores, and it saw a same-store sales decline among remaining stores of 6.3% for the 16-week period, compared with year-ago results.

Christopher Brown, president and chief operating officer of Nash Finch's wholesale division, said the loss of the Piggly Wiggly group in the Southeast accounted for a 4.2% decline in sales in the division, and the closure of the four corporate stores accounted for another 1.3%.

“Consumer shopping habits have changed, with some transaction sizes down, [and] a significant amount of effort from consumers in value shopping,” he said.

EBITDA in the retail and wholesale division — excluding military distribution — for the quarter was down 7.9%, to $27.9 million, compared with year-ago results. Combined retail and wholesale EBITDA for the 40-week, year-to-date period was down 12.2%, to $61.4 million, while sales in the division were down 7.7% year-to-date. Same-store retail sales fell 4.9% through the first three quarters.

The company said its overall net income for the quarter was down about 30.1%, to $15.3 million, compared with year-ago results, which included larger one-time gains. Total sales fell 7.5%, to $1.51 billion.

EBITDA for the quarter was down about 4.8%, to $43.8 million, but was up slightly as a percent of sales.

“This was achieved by placing a sharp focus on executing initiatives to improve productivity, reduce overall expenses and maintain profitability during this challenging economic environment,” said Covington.