PORTLAND, Ore. -- Fred Meyer Inc. here reported that net sales increased, but same-store sales and earnings decreased, in the second quarter and first half ended Aug. 12.
For the quarter, sales increased 5.2% to $775.8 million. Overall, comparable-store sales decreased 1.2%. Comparable nonfood sales decreased 3.1% but comparable food sales increased 1.5%.
Net income dropped 44.3% to $10.7 million in the quarter. Income from operations dropped 30.8% to $25.2 million.
For the 28 weeks, net sales increased 2.4% to $1.71 billion. Comparable-store sales decreased 3.3%. Comparable nonfood sales decreased 5.2% and comparable food sales decreased 0.5%.
Net income dropped 60.8% to $13.8 million for the six months. Income from operations dropped 39.7% to $41.4 million.
Robert G. Miller, chairman and chief executive officer, said the company was "disappointed" with its quarterly and year-to-date results. He attributed Fred Meyer's lackluster performance to "soft sales" in seasonal nonfood goods due to a mild winter. He also blamed competitive pressures.
Brian Suher, vice president of Piper Jaffray, Portland, Ore., said the entrance of category killers in the home improvement and electronics areas during the past year had a negative effect on Fred Meyer's results.
"What brings them down is they're not a pure grocer," he said. "The grocery [volume] itself is indicating that they're getting a greater flow of people. If you compare [food sales] to their total component, which was off on the six months, then you know that their sales in nonfood categories were really quite soft."
Fred Meyer is beefing up its private-label offerings and running market basket advertisements comparing the cost of shopping at its stores with the cost of shopping at its two major supermarket competitors, Safeway and Albertson's.
During the quarter, the company added food to two stores in Logan, Utah, and Anchorage, Alaska. Four new stores -- two in the Seattle area and two in the Salt Lake City area -- are scheduled to open during the third quarter. A new store in Kennewick, Wash., is expected to open during the fourth quarter.
Since the close of the quarter, Fred Meyer has closed two nonfood stores in Salt Lake City. One store with food in Chico, Calif., is scheduled to close later in the third quarter.