MINNEAPOLIS — Nash Finch here said last week that the performance of its retail division has been improving, but the stores will face some new competition from Wal-Mart Supercenters in the coming months that could sour those results.
The company also posted strong profit gains on its distribution side, although the recent loss of a large customer will hurt that division in the near term.
In the company's 12-week fiscal second quarter that ended June 16, Nash Finch posted a same-store sales gain at its retail division for the first time in several years, with an increase of 0.3%. That followed a decrease of 0.3% in the first quarter.
“It has been a long time since we've had positive retail comps, and that progression has been going on now for about a year,” said Alec Covington, chief executive officer, Nash Finch, in a conference call with analysts. “So we're very pleased.”
After closing several stores last year, overall retail sales for the quarter were down 7.9%, to $140.5 million. For the year-to-date period, sales in the retail division were down 9.2%, to $276.1 million. Retail EBITDA in the second quarter was off 1.1%, to $8.9 million, and down 0.6%, to $15.6 million, year-to-date.
Covington said he expected comps to be down 2% or more in the third quarter as the company faces two new openings of Wal-Mart Supercenters, several openings by independents and ongoing road construction in front of some locations.
On the distribution side, the company saw a minimum impact in the second quarter from the previously reported loss of Martin's Super Markets, the Indiana-based customer that switched to Spartan Stores, Grand Rapids, Mich., as its primary wholesaler. In the third quarter, however, Covington said the loss will result in a reduction of about $45.3 million in sales and $1.4 million in EBITDA.
Covington said some of the equipment from the Westville, Ind., warehouse that supplied Martin's will be redeployed to other warehouses, but said the distribution center — which was acquired from Roundy's Supermarkets in 2005 — “is very strategic to our future.”
As part of an effort to boost its distribution volume, the company also is focused on securing more business in the Detroit market, where A&P recently shuttered its Farmer Jack division and sold several stores to independents. Covington said Nash Finch picked up one new store as a primary supplier and three new stores as a secondary supplier through its current customer relationships.
Distribution sales were down 1% for both the second-quarter and year-to-date periods, compared with last year's results, to $633.1 million and $639.5 million, respectively. EBITDA, however, was up 17.9% for the second quarter, to $23.7 million, and up 9.9% for the half-year period, to $44.4 million.
Covington attributed the improved EBITDA to expense reductions, better inventory-management practices, better management of promotions and other factors.
|Sales||$1.06 billion||$1.07 billion|
|Net Income||$9.61 million||$4.13 million|
|Inc./Share||71 cents||31 cents|
|Sales||$2.1 billion||$2.1 billion|
|Net Income||$14.9 million||$7.99 million|
|* Net income was impacted by several one-time charges totaling (4 cents) in the second quarter of 2007, 24 cents in the second quarter of 2006, (5 cents) in the 24-week span of 2007 and 29 cents in the year-ago 24-week span.|