SHEBOYGAN, Wis. -- Schultz Sav-O Stores here said improved wholesale operations helped increase net income 16.5% to $1.4 million in the second quarter ended July 16.
"In accordance with the company's strategic plan, the reduction in margin due to greater emphasis on wholesale compared to retail sales was more than offset by the operating expenses that were eliminated by the company as a result of previously sold retail operations," Dahly said.
The decrease in sales, he said, was due to the sale of four corporate retail stores and their conversion to franchise units during 1993, combined with the February termination of a three-store customer in northeastern Illinois. Dahly declined to identify the customer.
James H. Dickelman, chairman, president and chief executive officer, said Schultz is pleased with the results of its strategy to increase emphasis on distribution to independent operators, which, he said, continues to generate record earnings.
"We are continuing to identify and implement solutions to improve operational efficiencies and the unsatisfactory performance of our retail business," Dickelman said.
Martin McDevitt, a securities analyst with Cleary Gull Reiland & McDevitt, Milwaukee, said 56% of Schultz's business comes from wholesale operations compared with 50.4% a year ago. He said he expects the company to continue to sell off corporate stores to franchise operators until wholesale business accounts for about 85% of its total.
McDevitt said Schultz Sav-O has benefited from a cost-cutting program in which it has farmed out meat and frozen food operations to an independent warehouse in Milwaukee, and from the ongoing benefits of a Teamsters union contract negotiated two years ago.
Schultz Sav-O's directors have authorized the company to spend up to $4 million to buy back shares, McDevitt said, and it has already spent $1.9 million to repurchase 110,000 shares this year.
Schultz distributes food to 64 franchised and 21 corporate-owned retail supermarkets operating under the Piggly Wiggly name and serves as a wholesaler to 30 independent food stores, most of which are very small, Dahly said.