Nash Finch Eyes Acquisition Market

MARK HAMSTRA

MINNEAPOLIS — Nash Finch Co. here last week said it is in a good position to make acquisitions in the distribution side of the business and that it would continue to eye small, fill-in opportunities on the retail side like the recent purchase of two Albertsons stores in the Upper Midwest.

The tightening of the credit markets has shrunk the universe of viable acquirers, “and that's causing the discussions to be a bit more reasonable,” said Alec Covington, president and chief executive officer, in a conference call discussing the company's fourth-quarter results.

“If you're a Nash Finch, and you've got a strong balance sheet and strong access to capital and a solid performing business, you're probably a rarity right now and you're probably a good dance partner,” he said.

Although he said the company does not have any acquisitions that are “under way or imminent,” it is continuing to hold discussions when opportunities present themselves.

“I'm not looking for a home run,” Covington said. “I just want to look for a few base hits. And when we could find a strong perishable company or a food company or meat business that would complement our existing business within our current geography where there's a lot of synergies, those are the kinds of deals that we would be most interested in.”

The recent purchase of two Albertsons stores in Rapid City, S.D., and Scottsbluff, Neb., allowed the company to consolidate market share in those areas and prevented competitors from gaining strength, he said.

“If it makes sense on the retail side, you may see us actually acquire some stores that we may intend to divest to a customer later if we can help grow our food distribution business,” Covington explained. “So, we'll look at all sorts of opportunities, but what you shouldn't expect to see is that we would go out and acquire some retail chain. That's just not our focus.”

The company expected by this week to complete converting one of its stores in Omaha, Neb., to the Avanza format targeting Hispanic customers, and is eyeing another in Greeley, Colo., slated for completion by July.

The company swung to profitability in the fourth quarter, posting net income of $8.5 million, vs. a loss of $26.4 million a year ago. Sales for the fourth quarter fell slightly, to $1.07 billion, vs. $1.1 billion in the year-ago quarter, attributable to the loss of Martin's Super Markets as a distribution customer.

For the full year, net income totaled $38.8 million, compared with a loss of $23 million a year ago, as sales slid about 2.1%, to $4.53 billion.

In the company's retail business, fourth-quarter EBITDA was down 35.8%, to $4 million, on a 6.4% decrease in sales, to $134.9 million, while EBITDA for the full year fell 9.9%, to $27.5 million, on a sales decline of 8.8%, to $591.7 million. Same-store sales fell 1.2% for the quarter and 0.8% for the year. Covington projected positive comp trends for the first quarter because of the early Easter holiday this year.

In distribution, EBITDA was up 29.2% for the quarter, to $26.1 million, on a sales decline of 4.7%, to $635.2 million. For the year EBITDA rose 17.9%, to $102.2 million, and sales were off 3.4%, to $2.69 billion.