INDIANAPOLIS (FNS) -- Marsh Supermarkets' quarterly same-store sales moved into positive territory for the first time in two years during the recent first quarter, Don Marsh, chairman, president and chief executive officer, said at the annual meeting here.
Like-store sales gained 0.4% in the first quarter ended June 25, a period that did not have the advantage of the Easter selling season as compared with the year-ago quarter. Moreover, same-store figures for the second quarter should be up "almost 2%," Marsh said. He also noted that customer transactions are up 2%. Total sales and other revenues rose 6.2% for the quarter, to $302 million from $285 million last year.
Operating income, or income before the cumulative effect of accounting changes, fell 23.3% to $2.4 million from $3.1 million. A credit of $1.9 million for accounting changes raised net income in last year's first quarter to $5.05 million.
The company attributed the income decline to increased promotional costs associated with new competition, accounting changes and markdowns associated with the introduction of Marsh's frequent shopper card, Fresh I.D.E.A. (Instant Discounts Electronically Applied).
Marsh also announced a plan to buy back $2 million worth of stock at market prices up to $14 a share. Marsh called the buyback an attempt to bolster investor interest in the Indianapolis chain.
"Management believes the stock is highly undervalued," Marsh told shareholders.
Philip Muldoon, an analyst with McDonald & Co.Investments in Cleveland, said the buyback is a "reasonable strategy," but said it is too early to gauge its chances of success.
Analysts said Marsh has maintained its No. 1 market share despite the entry of Meijer Inc., a Grand Rapids, Mich., chain, which has opened three 220,000-square-foot one-stop shopping stores in Indianapolis since May and has plans to open more.
At the meeting, Marsh said the company has been fighting to keep its customer base.
"It costs five times as much to acquire a new customer as it does to retain existing customers," he said.
He outlined his strategy of stressing service and customer individuality, a policy, he said, that distinguishes Marsh from other operators in the market, some of whom he considers less customer-friendly. Marsh said the company has been preparing for Meijer's entry as a competitor for the past two years. As a result, Marsh Supermarkets hasn't resisted sacrificing short-term earnings for efforts that are in the long-term interest of the company.
David Lebedeff, an analyst at Raffensperger & Hughes investment company here, said the first quarter was difficult, as expected, but the financial results were "right on expectations." He questioned whether the stock buyback will affect Marsh's cash flow and expansion plans, and noted the company may have to assess options such as borrowing.
Lebedeff said the company is pursuing value-added programs in categories such as produce and meats, avoiding the need to compete on price because service and quality are good.
Among merchandising programs highlighted at the annual meeting, Marsh said private label will experience considerable growth. Now at 15% of grocery sales, private label business is expected to rise to 25% within the next few years.
Other highlights from the meeting:
In 1995, Marsh plans to open three new supermarkets, which is one more than it had said previously, and five convenience stores. It also will look at expanding its LoBill market to a 300-mile radius of headquarters.
Village Pantry convenience stores, which feature deli food service and gasoline, had a 1.1% increase in sales over 1993. Actual figures were not available.
Convenience Store Distributing Co., a wholesale distribution unit serving the convenience store industry, posted a 16.8% increase in 1994 sales over 1993 with a growth potential of $75 million in 1995.