HARRY'S FARMER'S MARKETS HOPE TO TURN CORNER

BRENDA LLOYD

ROSWELL, Ga. (FNS) -- As discouraging as the past few years have been for Harry's Farmer's Markets, Harry Blazer, chairman, president, and chief executive officer, told stockholders at the annual stockholders meeting here that the company may be turning the corner.

Calling the 1999 fiscal year a "make it or break it year," Blazer said that he is encouraged by results in the first quarter, which ended April 29. Sales were down about 3% to $33 million and the quarter had a profit of $60,000, which was lower than the $830,000 profit reported in the first quarter of fiscal 1998.

However, the "real story" is gross margins, Blazer said. "We had an incredible improvement in gross margins." He pointed out that operating income in the first quarter was $322,000, compared to a loss of $170,000 in the 1998 fiscal first quarter. The last five years have been unprofitable for the company.

Blazer attributed the improvement partly to the company's efforts to implement the necessary technology to more accurately predict demand and efficiently control inventory. Gross margin also was favorably affected by approximately 0.8% of net sales as a result of no longer depreciating the bakery facility. It's for sale, and Harry's plans to move the bakery to the Alpharetta megastore during the third fiscal quarter.

"Maybe after years of hard work, we're on the verge of actually making it happen -- of leveraging [Harry's] into a success," he said. He said that Harry's will keep an eye on costs to make sure it stays on track for profitability. "Now we want to get sales back," he continued, adding that El Nino weather "has been devastating" to the produce department. "There are more problems of a serious nature than ever before," he said. "That has affected sales more than anything but, as we see the effects of that subside, sales should start to come back."

Harry's has three megastores and three Harry's In A Hurry convenience stores in the Atlanta metropolitan area. The third Harry's In A Hurry opened in January, which Blazer said was off to a "good start" but not "fantastic." He partly attributed the less than sterling results to road construction. Harry's plans to open three more new Harry's In A Hurry stores this year -- the first in Dunwoody, which will open this summer, one near downtown Atlanta in the Virginia-Highlands area this fall, and one in Roswell this winter. Blazer said that expansion plans for next year are in planning stages. He said that the megastores have always made money for Harry's, and he plans to keep them, but Harry's In A Hurry has a greater return and people like them.

Blazer added that Harry's is also looking at other alternative distribution channels.