FRESH BRANDS CEO EXITS AFTER EARNINGS REVISION

DAVID GHITELMAN

SHEBOYGAN, Wis. -- Fresh Brands here said last week the departure of Elwood Winn, its chief executive officer since 2000 and acting chief financial officer since September, was the result of its board's dissatisfaction with the company's recent performance.

Winn's exit came on the first business day following the company's announcement that it would have to increase its reserve for uncollectible franchisee receivables 66.7% to $550,000.

The move forced the company to revise downward its third-quarter results, originally released Nov. 4, lowering net income 32.9% to $684,000, and earnings per share 30% to 14 cents.

However, Walter Winding, Fresh Brands' chairman, told SN Winn's departure has "nothing to do with that announcement on earnings or reserves. It had everything to do with the overall operating performance of the company."

Winding said the company has engaged a national executive recruiting firm to conduct a search for a new CEO. Until one is found, Winding and Michael Houser, Fresh Brands' vice chairman, executive vice president and chief marketing officer, will assume the day-to-day duties and responsibilities of the CEO, according to the company.

In addition, the company said John Rocker, its vice president for retail operations, has also agreed to leave the company.

The problem with uncollectible receivables, Winding explained, stems from problems at only four of Fresh Brands' 73 franchised stores. "We're reviewing our internal credit policy as it revolves around those receivables," he said. "We have to manage our way through these receivable issues and be very, very clear when it comes to our credit policies."

David Livingston, a Pewaukee, Wis.-based retail consultant, said Fresh Brands' franchisees, which operate under the Piggly Wiggly and Dick's Supermarkets banners, have been hurt by a deluge of Wal-Mart supercenter openings, with more on their way. Livingston noted that Roundy's, which is also based in Pewaukee, is expected to open five stores in Fresh Brands' operating area in the next year.

Livingston commented, "Fresh Brands is still No. 1 when it comes to servicing the small, one-store rural communities. They can still grow sales in those markets by continually expanding and replacing those stores, along with adding fuel and pharmacy to their offerings. However, this may not be enough to offset the multiple openings by Roundy's and Wal-Mart."

However, Winding and Houser told SN they are convinced Fresh Brands can stand up to this competition.

Winding said, "Business is picking up here. Our top-line revenue is growing."

Houser added, "One of the keys to our success is making sure that we excel in the perishables areas. We have markets where we are actually growing share even though we are competing with Wal-Mart and Roundy's in those markets."