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    After Soft Q3, Nash Finch Details New Strategy

    MINNEAPOLIS -- Despite a $4.6 million net loss for the latest quarter, Nash Finch Co.'s chief executive said yesterday he remains optimistic that the company is poised to grow, via a new strategy to help the company yield better value in the marketplace.

    MINNEAPOLIS -- Despite a $4.6 million net loss for the latest quarter, Nash Finch Co.'s chief executive said yesterday he remains optimistic that the company is poised to grow, via a new strategy to help the company yield better value in the marketplace.

    During an analyst conference call yesterday morning, Alec Covington, president and c.e.o. of the wholesaler based here, said opportunities are ripe for Nash Finch to boost its business with independents, because "there is a profound lack of interest to support these types of formats in the marketplace" thanks to "the direction of the competition away from the independent base." Unlike major competition, he continued, becoming "a retail chain is not our focus." In addition, he said, Nash Finch is not saddled with "constantly having to explain why we're competing with our customers."

    As a result of being a smaller, "non-bureaucratic company" with "quick response time" and a more nimble, accessible management, Covington said, "We have a high sense of urgency, with an ability to answer [customer] questions quickly" and responsively.

    Nash Finch will first have to get its financial house in order. The wholesaler's loss of $4.3 million for the quarter ended October 7, 2006, compared unfavorably with net earnings of $11 million for the same period last year. Nash Finch's total sales for the latest quarter were $1.427 billion, compared to $1.465 billion in the prior-year quarter, the slight drop attributable to the closing of under-performing stores and higher levels of customer attrition in the food distribution segment, partially offset by stronger sales in the military segment.

    During the quarter, revenues slipped to $1.43 billion from the $1.46 billion reported last year. The company also posted an earnings-per-share (EPS) loss of $0.34 vs. $0.83 last year.

    For the first 40 weeks of 2006, Nash Finch earned $3.4 million or $0.25 per share, as compared to net earnings of $28 million, or $2.12 in the first 40 weeks of 2005.

    Total sales for the year to date were $3.5 billion vs. $3.4 billion, a slight increase that primarily reflects the company's acquisition of food distribution centers in Lima, Ohio and Westville, Ind.; and stronger military segment sales. These results were partially offset by a decline in the retail segment sales due to the closing of underperforming stores.

    Having nearly rounded out Nash Finch's senior executive team with the exception of a retaining a new c.f.o. and h.r. director, Covington said, "We're not rushing the process. When we find the right individuals, we'll know it. We intend to complete our leadership team as quickly as we can, preferably by the end of 2006, but if not, so be it. We want to make sure we have the right people, and not let haste get in the way," he said.

    Covington noted that Nash Finch's formerly high rate of employee turnover has subsided, leading to a more stable work environment. During the analyst call, he also said the company does not intend to expand dramatically is geographic footprint, but will instead "focus on our existing geographical region...to penetrate the scale of...where we'll already strong."

    Nash Finch said the sales decreases in the third quarter and year-to-date reflect the sale or closure of 13 stores since the third quarter 2005, as well as declines in same store sales of 1.8 percent and 2.1 percent respectively, attributable largely the introduction of supercenters and other alternative formats by competitors.

    During the first 40 weeks of 2006, Nash Finch repaid $24 million of revolving debt outstanding under its senior secured credit facility and $5 million on its term loan. While it continues to focus on effectively managing its working capital, reducing its debt load and improving cash flow, the company said it anticipates it might not meet its total leverage ratio covenant at the end of the fourth quarter. It is thus taking proactive steps to gain relief from its lenders by negotiating an amendment to its current credit facility, it said.

    In conjunction with the new strategic plan, Covington said the company intends to rationalize its retail and food distribution businesses, for which it will likely incur restructuring and impairment related charges in the range of $18 to $24 million during the next three fiscal quarters.

    Nash Finch's core food distribution business serves independent retailers and military commissaries in 31 states, the District of Columbia, Europe, Cuba, Puerto Rico, Iceland, the Azores and Honduras. The company also owns and operates a base of retail stores, primarily supermarkets under the Econofoods, Family Thrift Center and Sun Mart banners.

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