SHEBOYGAN, Wis. -- Fresh Brands here said last week it earned a lot of gratitude earlier this year from retailers who turned to it as a secondary distributor in the wake of the unraveling of their primary supplier, Fleming Cos., Dallas, but failed to gain a single new permanent customer for all its efforts.
During a conference call to discuss the results of the third quarter and 40 weeks ended Oct. 4, Elwood Winn, Fresh Brands' president and chief executive officer, said the company tried to secure a long-term relationship with a group of retailers it had started supplying in the first quarter, but was unsuccessful. Fresh Brands lost this business in mid-August when Supervalu, Minneapolis, acquired Fleming's Midwest operations from C&S Wholesale Grocers, Brattleboro, Vt., and started supplying the stores from its Kenosha, Wis., distribution facility.
"On a positive side, we helped some excellent retail operators serve their consumers well through some very trying circumstances," Winn observed. "In the meanwhile, we were the beneficiary of approximately $7 million in wholesale sales we would not otherwise have had." He said $2 million of these sales occurred in the third quarter.
"This was a very challenging quarter for us," Winn commented. He said the company will not achieve its twin goals for 2003 -- earnings "slightly below" the range of $1.54 to $1.60 per share and sales growth of 15% -- and declined to offer new guidance.
"There are just too many factors that could change during the quarter for us to provide accurate guidance at this point," he said.
Winn noted that in addition to competition from supercenters -- five of eight new stores that opened or plan to open this year in Fresh Brands' market area are supercenters -- dollar stores are becoming an increasing threat. "Fourteen of these stores operating under a variety of trade names have opened in the Milwaukee area in the last quarter," he said.
Fresh Brands has expanded its line of no-frills products, Valutime, to compete with these stores, Winn said. Introduced last year, Valutime featured 100 products and had sales of $1 million, he noted, but this year it includes nearly twice as many items and is expected to reach $3 million in sales.
In the 12-week quarter, net sales increased 7.6% to $152.6 million, and comparable-store sales grew 4.3%. Net income declined 29.4% to $1 million, and earnings per share were 20 cents, vs. 28 cents in last year's third quarter.
For the 40-week period, net sales rose 4.1% to $492.5 million. Net income fell 13.2% to $4.6 million, and earnings per share were 91 cents, vs. $1 in the comparable period last year.