OKLAHOMA CITY -- Homeland Stores here said increased competitive activity contributed to a 3.2% sales decline in the first quarter ended March 26.
inary charge of $3.9 million related to debt redemption.
Homeland, as reported, has hired outside advisers to assist with the sale of "all or a substantial portion" of its operations. Observers said the retailer needs financing to fund its expansion outside Oklahoma.
In the recent quarter, Homeland reported sales of $184.8 million. Same-store sales fell 3.1% in the 12-week period. Homeland, which operates 112 stores, said competitive pressure from Wal-Mart Stores, Bentonville, Ark., and Albertson's, Boise, Idaho, pressured sales growth.
"Although the company does not know how many stores Wal-Mart ultimately will open -- and the company is taking steps to respond competitively, including increased promotions -- Wal-Mart's entry may continue to have an adverse effect on the company's operations in the future," Homeland said in a filing with the Securities and Exchange Commission.
Steve Ruggiero, a securities analyst with Donaldson Lufkin & Jenrette, New York, said Homeland has managed to hold its own against Wal-Mart to date.
"It is cutting advertising costs by eliminating electronic media and some community newspapers and passing that savings back to customers in lower prices," Ruggiero said. "And it achieved savings of $6.7 million per year for three years by renegotiating with the union and slashing labor costs, and that's also going back to customers in lower prices."
Homeland's gross margins decreased to 25.5% of sales from 25.7% a year ago, according to the SEC filing. This was due to Homeland's move to reduce prices in an attempt to remain competitive and retain market share, the company said.