BIRMINGHAM, Ala. -- Bruno's Inc. here may have to consider using some hard assets as collateral to secure existing loans from its banking syndicate to stem syndicate concerns over its financial condition, Wall Street analysts told SN last week.
Analysts said the company's financial condition is continuing to deteriorate, with expectations that operating cash flow for the third quarter ended Nov. 1 will have dropped significantly -- possibly to $8 million to $10 million, compared with $28 million in last year's third quarter. Those results are scheduled for release next week.
Further declines in earnings before interest, taxes, depreciation and amortization during the fourth quarter could cut operating cash flow for the year by almost half -- to $70 million to $80 million, compared with $154 million for the prior year -- analysts told SN.
Executives at Bruno's could not be reached for comment last week; the chain's major investor, Kohlberg Kravis Roberts & Co., New York, declined comment. Analysts declined to be named. However, in published reports the company confirmed it had requested an extension of waiver covenants through July 1998 and said it anticipated completing that agreement later this month.
Since KKR acquired Bruno's in August 1995, the company has pursued programs that, in some cases, confused customers and resulted in a steady sales decline -- a situation that culminated last fall in the resignation of William Bolton as chairman and chief executive officer, observers said.
He was succeeded by James Demme, "who has spent a lot of time in the stores boosting employee morale," one analyst told SN last week. "But even if Demme has instituted some changes in his brief time there, the company is so beleaguered that it would be difficult for any new programs to take hold very quickly," that analyst said.
Another analyst said the company is attempting to reverse its fortunes by incentivizing employees, remerchandising the stores, eliminating distribution problems and improving private-label programs. "Management has identified several areas of opportunity, but nothing has taken hold yet, and we're unlikely to see anything positive for six months or so, until at least the second quarter of 1998."
