MESA, Ariz. -- Megafoods Stores here reported a loss, positive cash flow and increased sales for the first quarter ended April 2. The loss amounted to $2.8 million, compared with net income of $1.1 million a year ago. The loss includes depreciation of $3.1 million and interest charges of $2.6 million.
ed its gross margins from 12% to 13% to 24% to 25% without losing sales, noted Dean Miller, chief executive officer. Megafoods expects to launch a major promotional effort in San Antonio early next month -- at about the same time it completes changing the signage for 15 Texans' Warehouse Foods units, which are being converted to conventional formats under the Handy Andy banner. Those stores are expected to be fully remerchandised by early August.
"While we still have a way to go to turn the Texas operation profitable, we have made progress," Dean Miller, chief executive officer, said. "Our gross margins are now at a profitable level, and we are concentrating on increasing sales to bring our operating costs in line."
"In fact, sales have increased slightly, which indicates people are shopping us for convenience -- and that's without any major promotional efforts.
According to Miller, the stores outside Texas performed "at a satisfactory level both in terms of sales and operating profits, and our gross margins reflected the benefits we expected from our new supply agreement with Fleming.
"Nevertheless results were still adversely impacted by the 10 new stores opened in the fourth quarter."