SHEBOYGAN, Wis. -- Fresh Brands here said a strong focus on competitive pricing helped drive sales gains in the first quarter as the company reversed a loss in the year-ago period.
Since rolling out a new "value proposition" at all of its corporate stores and Piggly Wiggly franchised stores last November, Fresh Brands is "seeing some positive trends developing at these locations," said Louis E. Stinebaugh, president and chief operating officer, in a conference call discussing its results for the 16-week period that ended April 23. "We believe that with our competitive price changes we have made, the best quality perishables in the market, combined with superior ser-vice, will give us a winning formula for long-term success."
The value program features a more competitive pricing structure on center-store merchandise and perishables and an everyday-low-price position in general merchandise and health and beauty care.
Stinebaugh said the company's franchised stores that were relatively unaffected by competitive openings in the first quarter recorded same-store sales gains of 2.1% for the period. Overall same-store sales, however, grew by 0.9%, as stores that faced competitive openings posted negative same-store sales results. Corporately owned stores posted same-store sales gains of 0.3%.
The company reported net income for the first quarter of $212,000, compared with a loss of $1.7 million in the year-ago period, which included charges for the sale and closure of corporate stores. Net sales improved less than 1%, to $197.7 million.
Operating profit in the company's wholesale division increased to $3.9 million, from $830,000 a year ago. The gain was partially offset by operating losses of $1.5 million and $517,000 in the corporate and franchised retail divisions, respectively.
Wholesale sales were down about 4.2%, to $140.7 million, while corporate retail sales fell 7.5%, to $79.7 million, and franchised retail sales grew about 17%, to $38 million. Franchised retail sales include results from 18 stores that are included in Fresh Brands' results because of its loan guarantees to those operators.
The company said that during the quarter it closed an unprofitable corporate store in its headquarters market and "facilitated the closure" of two underperforming franchise stores that were generating losses for the wholesale division. Fresh Brands also assisted in the sale of two franchised stores to another franchise operator.
The company also said it was continuing to pursue wholesaling opportunities to retail customers other than its franchisees.
"We've added new independent customers outside of our traditional franchise and corporate stores and expect to continue expanding the wholesale segment of our business going forward," said Stinebaugh.
Fresh Brands has 77 franchised stores, 20 corporate supermarkets and two convenience stores under the Piggly Wiggly and Dick's Supermarkets banners in Wisconsin, northern Illinois and Iowa.
