KANSAS CITY, Kan. -- Associated Wholesale Grocers here outlined a theme of "investing for the future" in explaining unusual expenditures and reduced earnings.
"Investments in technology and operations, vital to the company and our members' future, were undertaken and are reflected in the year's sales and patronage figures," said the wholesaler's annual report.
Net earnings in 1997 were $63.9 million, down 4.3% from the year prior. Sales of $3.1 billion were essentially unchanged from 1996.
AWG said it spent $2.6 million last year on its year-2000 compliance program alone.
"Every business in the world will be forced to respond to this 'glitch' that causes computers not to 'understand' the year 2000, and many will be scrambling at the last minute (at a much inflated cost) to be able to continue business past the turn of the century," the report said. "We are proud to say that our Year 2000 project will be completed ahead of schedule and under budget."
The company made substantial improvements in the perishables areas of its Kansas City division, increasing the fresh-meat, processed-meat, dairy and deli areas by 46,000 square feet, expanding the produce area by about 40% and widening aisles overall.
Other 1997 expenditures cited by AWG included investments in the Destiny Project, a shift to an electronic data-exchange system, and the Information Technology Strategic Plan, a move to overhaul operating systems and to improve communications both within the company and with individual members.
Two bright spots for AWG were private-label and nonfood sales. AWG Brands generated sales of about $400 million in 1997, a 4.5% increase from 1996 and a record for the division. Valu Merchandisers Co., AWG's wholly owned nonfood subsidiary, had sales of $151 million, a record increase of 34% from the year prior.
The company attributed the jump in nonfood sales to heavy movement of seasonal products and the servicing of non-member K-VA-T Food Stores, Grundy, Va., which operates 66 stores in Kentucky, Virginia and Tennessee under the Food City banner.