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MINNEAPOLIS -- Pointing to costs associated with integrating two distribution centers acquired earlier this year, Nash Finch here yesterday posted a 24 percent profit decline for the third quarter of 2005.
The retailer/distributor posted $11 million in net income, or 83 cents per diluted share, during the quarter vs. earnings of $14.6 million, or $1.15 a share, a year ago.
On the upside, Nash Finch also logged $1.5 billion in total sales in the quarter ended Oct. 8, up 23 percent from $1.2 billion in the same period last year, primarily the dividend of its acquisition of Roundy's wholesale food distribution centers in Lima, Ohio, and Westville, Indiana, at the end of March.
That acquisition, however, drove up the company's costs in the quarter. Total costs and expenses were $1.4 million, up 24 percent from $1.2 million a year ago.
Ron Marshall, Nash Finch's c.e.o., said he was disappointed with the third quarter results, which he said suffered as a result of inadequate promotional spending, retail pricing pressures, and higher than expected costs related to the acquisition.
"We did not fully appreciate the degree to which the demands of integrating the Lima and Westville divisions would divert attention from our day-to-day operational execution," said Marshall. "We had expected to be able to manage the issues that led to the decrease in gross profit margins in a manner and a timeframe that would minimize their financial impact, and to begin realizing the financial benefit of synergies inherent in this acquisition sooner. We lowered our earnings forecast for the year as a result of these issues and are executing plans to address them. We believe an overall improvement in margins will occur in 2006."
For the year to date, total sales were $3.4 billion compared to $2.9 billion in the prior-year period.
Food distribution segment sales for the third quarter of 2005 increased 45 percent to $886.3 million vs. $610.9 million in the third quarter 2004. For the first 40 weeks of 2005, sales increased 33 percent to $1.98 billion from $1.49 billion in the comparable 2004 period.
The company said acquisition of the distribution centers represented approximately 89 percent and 87 percent of the increase in food distribution sales during the third quarter and year-to-date periods, respectively. Excluding the impact of the acquisition, food distribution sales increased 5 percent in the third quarter, and 4.3 percent year-to-date.
In other news, Nash Finch elected Robert L. Bagby, chairman and c.e.o. of A.G. Edwards, Inc., to serve on its board of directors. The board also accepted the resignation of Laura Stein as a director, effective Dec. 3. Stein, s.v.p./general counsel of The Clorox Co., has been a member of the Nash Finch Board since February 2001.
Nash Finch serves independent retailers and military commissaries in 28 states, the District of Columbia, Europe, Cuba, Puerto Rico, Iceland, the Azores and Honduras. The company also owns a base of 80 stores, primarily supermarkets under the Econofoods, Family Thrift Center, and Sun Mart trade names.