MINNEAPOLIS — Nash Finch Co. here on Thursday said lower gross margins in its military distribution segment and higher operating expenses led to a 62.2% decrease in net earnings in the fiscal first quarter.
The earnings figure was slightly above the company’s expectations as Nash Finch realized sales increases in its retail and distribution segments, mainly as a result of new customers. For the quarter, which ended March 23, sales of $562.2 million improved by 2.3% from the same period last year. Net earnings totaled $2.1 million and reflected increases in selling, general and administrative costs, depreciation and higher interest expenses.
Adjusted EBITDA of $18.6 million, or 1.7% of sales, was down from 2.2% of sales in the first quarter last year.
Alex Covington, Nash Finch’s president and chief executive officer, said terms of Nash Finch’s contracts with military commissaries, along with slower inflation, trimmed gross margins. Military sales in the quarter totaled $532 million, a decrease of 0.4%, while EBITDA in the division of $7.9 million, or 1.5% of sales, was down from 2.5% of sales in last year’s first quarter.
"We are continuing to see pressure on gross margins in the military segment from lower contractual margin rates and lower food price inflation than the same quarter last year,” Covington said.
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The acquisition of the Bag ’N Save and No Frills chains last year helped to boost retail and distribution sales by 5% to $562.2 million in the quarter. Retail same-store sales declined by 0.5%, while EBITDA as a percent of sales in the division was down slightly to 1.7%.
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