OKLAHOMA CITY -- Fleming Cos. here said last week it expects to complete its strategic-planning process by the end of the year as a prelude to improving its financial performance.
mpany's results for the third quarter ended Oct. 3 -- which showed sales down marginally and a loss -- Edward C. Joullian 3rd, interim chairman, said, "These results underscore the importance of the comprehensive strategic-planning process in which we are engaged."
Fleming said earlier this year it hired Bain & Co., Boston, to facilitate development of a strategic plan focusing on the options and alternatives available to the company.
"The performance of every asset at Fleming is being thoroughly reviewed in a collaborative effort involving the board, senior management and Bain & Co.," Joullian said last week. "We expect to complete our analysis in the fourth quarter; then we intend to take steps designed to address the issues we face and to improve our company's longterm performance."
Among the challenges, he said, is "becoming more adept at managing margins and bringing expenses in line with sales in a very competitive marketplace."
Joullian said the company is working with Spencer Stuart, an executive search firm, to identify "top-notch final candidates" for the CEO position.
"To achieve our performance goals, we must carefully select the best possible CEO and focus our energies and investments on producing improved results for our company, our customers and our shareholders," Joullian said.
A company official said Fleming hopes to name a new CEO by the end of December or early January.
Fleming said sales fell 0.4% to $3.4 billion for the 12-week quarter -- the lowest variance in three years, the company noted -- and 2.1% to $11.5 billion for the 40 weeks.
The company said it had a net loss of $2.3 million for the quarter, while net income rose 86.3% to $26.6 million for the year to date; net income for the year-ago period was affected by an extraordinary charge of $13.3 million related to a company recapitalization.
Fleming said it would have had net income of $1.8 million for the current quarter except for nonrecurring net expenses of $4.1 million related to several factors:
* Expenses related to the sale to Associated Grocers, Seattle, of Fleming's Portland, Ore., division.
* Higher corporate expenses, particularly executive-severance costs related to the departure of Stauth and other executives last July.
* Expenses related to a November 1997 settlement of litigation with Furr's Supermarkets, Albuquerque, N.M., involving payment of monthly fees while the retailer moved to self-distribution -- payments that ended last week with the sale of Fleming's El Paso distribution center to Furr's.
Also affecting third-quarter results, the company said, were lower operating earnings in the food-distribution segment, including higher selling and administrative expenses and lower interest income. Partially offsetting those factors were lower interest expense and improved equity investment results, Fleming added.
According to Joullian, "We have demonstrated an increased ability to attract new food-distribution business from existing as well as new customers over the last three quarters, and we are on track to reach our goal of adding 20 new company-owned stores and remodeling 35 to 40 others this year."
Fleming said it opened four new corporate stores during the third quarter, for a total of 10 year-to-date, and remodeled nine in the quarter, for a total of 24 so far this year.
Sales in Fleming's retail-food segment rose 4% to $808 million for the quarter and 3% to $2.7 billion for the year to date, while same-store sales fell 2.1% for the quarter and 3.9% for the 40 weeks.
Operating earnings in the retail-food segment were unchanged at $11 million for the quarter and down 15% to $51 million for the year to date.
The company said operating earnings in retail food were positively affected by increased sales, which were offset by new-store development and marketing expenses. Sales were weak in some retail chains, the company noted, although the rate of decline in same-store sales decreased from 5.2% a year ago to 2.1% during the current quarter.
Sales in Fleming's food-distribution segment fell 1.9% to $2.6 billion for the quarter and 3.5% to $8.8 billion for the 40 weeks. Operating income for the segment fell 21.9% to $50 million for the quarter and 5.1% to $204 million for the 40 weeks. The company said operating earnings were negatively affected by higher selling and administrative expenses and by charges related to the sale of its Portland division.
