PALM BEACH, Fla. -- Nash Finch Co. said it expects distribution revenues to get a boost again this year as it continues to pick up business from former Fleming customers.
Speaking at the Wachovia Consumer and Industrial Growth Conference here earlier this month, Robert Diamond, chief financial officer, Nash Finch, Minneapolis, said distribution revenues grew from being 8% below prior-year levels in last year's first quarter to being 9% above year-ago levels in last year's third quarter, a 17% swing he attributed in part to new customers picked up after Fleming's April 1, 2003, bankruptcy filing.
"We believe that trend will continue for the next 18 to 24 months, as it continues to be a fluid situation where these former Fleming customers are making decisions about who will be their supplier in the long term," he said.
Many former Fleming customers will continue to switch wholesalers, he predicted, as they near the end of short-term contracts they signed with replacement suppliers.
"I think this is going to change a lot as we cycle through a full year of Fleming going out of business," he said. "There are a lot of former Fleming customers who feel that their needs are not being met. There were merchandising services they were used to receiving from their past supplier that they do not receive from their current one at the level they expect. Our goal is to capture as much of that business as possible."
Diamond said Nash Finch's retail grocery wholesaling division, which accounts for about 48% of the company's annual $4 billion in revenues, has also been improving its profitability through the introduction of new technologies and the consolidation of facilities.
He said the company experienced an increase of 13% in sales per square foot in its warehouses in the past year, and an overall decrease of 10% in cost per case shipped.
Also, sales of the company's three private-label brands -- Our Family, Value Choice and Avanza -- have been increasing as a percent of total sales, Diamond said.
"With those items, we have been able to increase private-label sales from 11% of total sales to 15% of total sales in the last few years," he said.
The company's retail sales have been trending down, however. Retail sales for the third quarter decreased $30.4 million, or 9.4%, compared with the prior-year period. Sales for the 40 weeks ended Oct. 4, 2003, fell $71.8 million, or 8.9%, compared with the prior year period. Same-store sales fell by 11.3% in the third quarter and 11.5% for the 40-week period.
In response to a question about the profitability of the company's Avanza supermarkets for Hispanic consumers, which Nash Finch operates in Colorado and Chicago, Diamond said store-level margins are about the same as a typical supermarket, even though prices tend to be lower overall. Since perishables comprise about 50% of total-store sales at Avanza, vs. 30% to 35% at a typical store, Avanza makes up for the low margins on its center store products by selling more high-margin perishables.