MINNEAPOLIS -- Nash Finch Co. here said a downturn in sales at corporate retail stores in the Midwest and lower tobacco margins in the Southeast resulted in disappointing earnings despite record sales for the third quarter and 40 weeks ended Oct. 8. Net income rose 34.1% to $4 million for the 16-week quarter and 12.8% to $11.8 million for the year to date. Sales increased 3.5% to $887 million for the quarter and 4.1% to $2.18 billion for the 40-week period. The company said the lower-than-expected increase in earnings was a disappointment despite the new sales records. In the Midwest, profit improvement from wholesale operations was offset by a downturn in results from corporate retail operations, due largely to sluggish sales, costs associated with newly expanded and remodeled stores and continued competitive pressures in certain retail markets, the company said in a statement. Operating results for wholesale distribution centers in the Southeast, particularly those serving the convenience store industry, were severely affected by lower margins on tobacco products due to price reductions and changes in promotional allowance and rebate practices by the tobacco industry, the company said. Gary Giblen, a securities analyst with PaineWebber, New York, said third-quarter earnings were not as strong as the company had hoped in light of a depressed quarter a year ago that resulted from problems among several Nash Finch customers. "Wholesalers in general are having a tough time," Giblen said, "and Nash Finch is more vulnerable than some of the larger companies because it serves so many smaller operators. In addition, the problems in its Midwest retail operations show the constant challenge for wholesalers to operate on the retail side. "The question is, can Nash Finch achieve any real, sustainable growth, or is it simply stuck?" Nash Finch supplies products to approximately 700 affiliated and independent supermarkets and 5,000 other independents and military bases in 31 states. It also owns and operates approximately 120 supermarkets, warehouse stores and mass merchandise stores in 15 states and produce marketing subsidiaries in California.
