SHEBOYGAN, Wis. -- Schultz Sav-O Stores here said increasing business for its wholesale segment boosted earnings, despite reduced sales, for the third quarter and 40 weeks ended Oct. 8.
to $341.2 million.
James H. Dickelman, chairman, president and chief executive officer, attributed the volume decrease to the sale of four corporate retail stores and their conversion to franchise units during 1993, combined with the termination last February of a three-store wholesale customer in northeastern Illinois that the company declined to identify.
Another corporate store is expected to be sold and converted to a franchise unit prior to the close of the current fiscal year, Dickelman said. Two replacement stores are under construction by franchise operators, with additions planned at eight other franchised units, he added.
Martin McDevitt, a securities analyst with Cleary Gull Reiland & McDevitt, Milwaukee, said the improvement in Schultz's earnings is due to a better mix between wholesale and retail sales.
"The remaining corporate stores, mostly in urban areas, have been a drain, while those in smaller communities that have been franchised have been run better, with lower cost structures," McDevitt explained. As of Nov. 7, Schultz had acquired a total of $7.1 million of its common stock under repurchase authorizations from its board of directors. McDevitt said the buyback program improves shareholders' return on equity and ultimately earnings per share.
Schultz distributes food to 64 franchised and 21 corporate-owned retail supermarkets operating under the Piggly Wiggly name, as well as 30 independent food stores.
Approximately 56% of its business is wholesale. The company is expected to continue to sell off corporate stores to franchise operators until wholesale business accounts for about 85% of the total, observers said.