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Nash Finch Sees Promotions Driving Sales Trends

MINNEAPOLIS — Nash Finch Co. here said last week it plans to continue to make promotional investments in selected markets to drive sales, based on the top-line improvements it saw in its retail segment during the third quarter. Comparable sales at its corporate stores declined 0.5% in the quarter, following negative 3.7% comps in the second quarter, and if we continue to execute the way we're executing

MINNEAPOLISNash Finch Co. here said last week it plans to continue to make promotional investments in selected markets to drive sales, based on the top-line improvements it saw in its retail segment during the third quarter.

Comparable sales at its corporate stores declined 0.5% in the quarter, following negative 3.7% comps in the second quarter, “and if we continue to execute the way we're executing right now and the market remains about steady, we hope to flip that to flat to slightly positive in the fourth quarter,” Alec Covington, president and chief executive officer, told analysts during a conference call.

For the 16-week quarter that ended Oct. 8, net income fell 34.2% to $10.1 million — primarily due to a series of one-time charges, the company said — while sales fell 2.6% to $1.5 billion due to the closing or sale of eight retail stores and the loss in 2010 of the distribution volume to 25 Piggly Wiggly stores in the Southeast to Merchants Distributors Inc., Hickory, N.C.

For the 40-week, year-to-date period, net income declined 18.8% to $27.6 million, while sales dropped 4.5% to $3.7 billion and retail comps fell 2.5%.

Covington said a new asset-based loan agreement that should be in place by the end of the year to replace its current ABL facility will impact fourth-quarter results. “When you put a new ABL facility in place, there are a few financing costs that get written off as a result, and we believe that's going to result in a one-time cost of 9 cents to 10 cents in the fourth quarter,” he explained.

Looking ahead, Covington said he is optimistic, though his comments were mixed.

“We're seeing some strength in our customer base, with sales being driven by improvements in marketing and merchandising they are making, as well as by programs we're putting in place in food distribution to help support them better.

“But we remain guarded in our assessment of sales because we still are faced with a consumer that's experiencing great budgetary issues at the same time high unemployment remains, which causes us to have some headwinds. And food inflation compounds the problem.

“We believe we are seeing indications that consumers appear to be tightening up again on discretionary spending.”

Covington said he sees inflation abating in the next few months, particularly in Center Store categories. “I've never believed this economy could support the level of inflation we've seen because inflation just isn't sustainable in a sluggish economy with high unemployment,” he explained.

“We're seeing a little bit of fall-off in some commodities,” he noted, and while perishables pricing is subject to other factors, the changes Wal-Mart Stores is making in its fresh meat program “will probably put a little pressure on beef pricing.”

Q3 RESULTS

Qtr Ended 10/8/11 10/9/10
Sales $1.47B $1.5B
Change -2.6%
Comp-store -0.5%
Net Income $10.1M $15.4M
Change -34.2%
Inc./Share 77 cents $1.18
40 Weeks 2011 2010
Sales $3.7B $3.9B
Change -4.5%
Comp-store -2.5%
Net Income $27.6M $34.0M
Change -18.8%
Inc./Share $2.12 $2.57