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    Fresh Brands Same Store Sales Up 5.3 Percent In 3Q

    SHEBOYGAN, Wis -- Fresh Brands Inc., the owner of Piggly Wiggly and Dick's Supermarkets, took a loss in the third quarter due to a large impairment charge on three underperforming stores.

    SHEBOYGAN, Wis -- Fresh Brands Inc., the owner of Piggly Wiggly and Dick's Supermarkets, took a loss in the third quarter due to a large impairment charge on three underperforming stores.

    For the quarter ended Oct. 8, the company reported an $8.2 million loss, or $1.66 per share, vs. $323,000, or 7 cents per share, in the same period a year ago. The results included a non-cash charge of $8.9 million, or $1.80 per share, although without the charge, earnings would have been 14 cents per share, Fresh Brands said.

    On the bright side, Fresh Brands rang up $160.5 million in sales, up 4 percent from last year's $154.3 million in the quarter, while its same store sales rose 5.4 percent during the quarter for company-owned and franchise units.

    "We realized excellent sales increases throughout our corporate and franchised Piggly Wiggly stores," said Louis Stinebaugh, president and c.o.o. in a statement, "as a result of the continued success of our value proposition strategy, improved weekly promotions, and in-store merchandising programs. We are especially pleased that the sales increases also resulted in significant increases to operating profits in most of our corporate and franchised stores. We believe these results indicate that we are on track with achieving the goals of our retail pricing and marketing strategy."

    The retail sales increases have also driven significant gains in the company's wholesale segment, said Stinebaugh, Wholesale volume in the quarter increased by 2.7 percent over the prior year.

    The company's c.f.o. John Dahly said the impairment charges taken in the quarter were primarily related to three "relatively new but underperforming corporate stores" that presented daunting challenges.

    "During the past year, we attempted to significantly improve the sales volumes in these stores through the overall value proposition marketing changes, targeted marketing initiatives, and by seeking to effect in-market consolidation opportunities for these stores," said Dahly. "Despite some notable recent success with these efforts, we now believe that we will not be able to recover the carrying value of our investments in these stores."

    "We intend to pursue the sale or closure of two of the stores within the first half of 2006 to eliminate their ongoing operating losses," Dahly said. The company anticipates that disposing of the two stores may benefit future operating results by approximately $1.3 million annually. "We currently do not intend to close the third store, but will further improve operating results by $0.2 million annually, or $0.05 per diluted share, due to reduced depreciation and amortization charges," Dahly added.

    Fresh Brands is also closing its secondary general merchandise distribution facility in Sheboygan, Wis. The company said it has planned for alternate arrangements that are expected to improve operating results by about $300,000, or 6 cents per share.

    "We also have committed to plans for alternate procurement and cross-docking arrangements of the general merchandise processed through our secondary distribution facility in Sheboygan, Wisconsin and will be closing that leased facility," said Dahly. "We expect to improve future operating results by approximately $0.3 million annually, or $0.06 per share, through the cross-docking arrangement beginning in the second quarter of 2006."

    During the third quarter of 2005, Fresh Brands improved liquidity and operating cash flows amid careful management of capital expenditures and increased working capital levels to accommodate seasonal and other merchandising activities, said Dahly.

    Fresh Brands' wholesale sales increased $2.9 million, or 2.7 percent, during the third quarter of 2005; but decreased $5.5 million, or 1.5 percent, for the first three quarters of 2005 compared to the same periods of 2004. Company officials said the increase in wholesale business during the third quarter reflected improved sales within the company's continuing store base, consistent with its increased sales throughout its corporate and franchised stores. The decrease in wholesale sales for the first three quarters primarily reflected the impact of closing three franchise stores and six corporate stores since the first quarter of 2004 and selling one corporate store in August 2004.

    Fresh Brands currently has 74 franchised supermarkets, 20 corporate-owned supermarkets and two corporate-owned convenience stores, all of which are served by two distribution centers and a centralized bakery/deli production facility.

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