MINNEAPOLIS - Citing declining retail sales, ongoing integration expenses and a less profitable sales mix, Nash Finch here said profits fell by 44.3% during its fiscal first quarter.
Earnings of $3.9 million, or 29 cents per share, fell from $7 million and 54 cents, respectively, as compared to the same period a year ago. Analysts polled by Thomson Financial had expected 64 cents in earnings.
Stock in the distributor subsequently tumbled by nearly 20% following the announcement late last week. LeAnne Stewart, chief financial officer of Nash Finch, described the quarter as "a disappointment from a sales and earnings perspective" in a conference call with analysts.
Overall sales of $1 billion were up 17%, reflecting new distribution business from the Roundy's acquisition a year ago, but new sales were offset by a sharp decline in retail sales, and were less profitable than a year ago.
1ST-QUARTER RESULTS
Qtr Ended: 3/25/2006; 3/26/2005
Sales: $1 billion; $882.2 million
Change: +17%
Comp-store: (4.1)%
Net Income: $3.9 million; $7 million
Change: (44%)
Inc/Share: 29 cents; 54 cents
Sales in the distribution segment were up by 38% in the quarter to $620.5 million, but profits as a percent of sales decreased from 3.5% to 2.9%, Stewart said, due to more sales going to nontraditional customers buying lower-margin goods. Competitive pressures facing Nash Finch's retail customers in the meantime forced the distributor to pass "the best cost of goods possible" onto its customers.
Costs associated with the integration of the two warehouses acquired a year ago from Roundy's also contributed to reduced profits from the distribution segment, Stewart said. Nash Finch earlier this year said it would take a more deliberate approach to realizing synergies from the acquisition.
Corporate retail sales fell 10% to $154.4 million, due in part to store closures, a same-store sales decrease of 4.1% among Nash Finch's 71 retail stores, and the timing of Easter, which was in the first quarter last year but in the second quarter this year, Stewart said. The company closed six stores in the quarter. Profits as a percent of sales fell from 3.4% to 2.8%.
"The expansion of Wal-Mart Supercenters is creating a considerable amount of pressure for our corporate stores and independent customers," said Bruce Cross, executive vice president, merchandising.
Military sales of $262.8 million were flat from a year ago, but they too were less profitable during the quarter, Stewart said, generating $8.7 million in profits as compared to $8.9 million a year ago. This resulted from fewer sales overseas and inventory reductions, and a greater mix of lower-margin sales to U.S. commissaries. By JON SPRINGER
MINNEAPOLIS - Citing declining retail sales, ongoing integration expenses and a less profitable sales mix, Nash Finch here said profits fell by 44.3% during its fiscal first quarter.
Earnings of $3.9 million, or 29 cents per share, fell from $7 million and 54 cents, respectively, as compared to the same period a year ago. Analysts polled by Thomson Financial had expected 64 cents in earnings.
Stock in the distributor subsequently tumbled by nearly 20% following the announcement late last week. LeAnne Stewart, chief financial officer of Nash Finch, described the quarter as "a disappointment from a sales and earnings perspective" in a conference call with analysts.
Overall sales of $1 billion were up 17%, reflecting new distribution business from the Roundy's acquisition a year ago, but new sales were offset by a sharp decline in retail sales, and were less profitable than a year ago.
1ST-QUARTER RESULTS
Qtr Ended3/25/20063/26/2005
Sales$1 billion$882.2 million
Change+17%
Comp-store(4.1)%
Net Income$3.9 million$7 million
Change(44%)
Inc/Share29 cents54 cents
Sales in the distribution segment were up by 38% in the quarter to $620.5 million, but profits as a percent of sales decreased from 3.5% to 2.9%, Stewart said, due to more sales going to nontraditional customers buying lower-margin goods. Competitive pressures facing Nash Finch's retail customers in the meantime forced the distributor to pass "the best cost of goods possible" onto its customers.
Costs associated with the integration of the two warehouses acquired a year ago from Roundy's also contributed to reduced profits from the distribution segment, Stewart said. Nash Finch earlier this year said it would take a more deliberate approach to realizing synergies from the acquisition.
Corporate retail sales fell 10% to $154.4 million, due in part to store closures, a same-store sales decrease of 4.1% among Nash Finch's 71 retail stores, and the timing of Easter, which was in the first quarter last year but in the second quarter this year, Stewart said. The company closed six stores in the quarter. Profits as a percent of sales fell from 3.4% to 2.8%.
"The expansion of Wal-Mart Supercenters is creating a considerable amount of pressure for our corporate stores and independent customers," said Bruce Cross, executive vice president, merchandising.
Military sales of $262.8 million were flat from a year ago, but they too were less profitable during the quarter, Stewart said, generating $8.7 million in profits as compared to $8.9 million a year ago. This resulted from fewer sales overseas and inventory reductions, and a greater mix of lower-margin sales to U.S. commissaries.
