Nash Finch Company (
reported second-quarter 2013 earnings (excluding one-time items)
of 64 cents per share, 7.2% lower than 69 cents per share
reported in the year-ago period. The drop was due to pressure on
military gross margins during the quarter.
Earnings, however, surpassed the Zacks Consensus Estimate of
48 cents by 33.3%. The earnings beat was backed by higher than
expected sales following several strategic initiatives like
competitive pricing and strategic partnerships during fiscal
Nash Finch's total sales in the second quarter of 2013 were
$1.2 billion, up 9.1% from the year-ago quarter. The takeover of
12 Bag 'N Save stores in May 2012, and 18 No Frills stores during
the second quarter boosted total sales by $23.1 million. Sales
exceeded the Zacks Consensus Estimate of $1.14 billion.
Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) in the second quarter of 2013 declined 3.2%
to $26.9 million. The EBITDA margin shrank 30 basis points (bps)
to 2.2% . Selling, general and administrative expenses amounted
to $72.2 million up 14.8% from the prior-year quarter.
Sales inched up 2.2% year over year to $537.5 million in the
second quarter of 2013 backed by initiatives to attract new
business connections and proper utilization of the military
The segment's EBITDA decreased 41.5% from the prior-year
quarter to $6.9 million, owing to the decline in gross margin
related to lower contractual margin rates and low inflation
during the quarter. The EBITDA margin was 1.3% in the reported
quarter, down 90 bps from the prior-year quarter.
Food Distribution sales increased 10.3% to $487.2 million in the
quarter. The increased was primarily due to addition of new Food
distribution customers in the quarter.
Segment's EBITDA climbed 26.2% to $11.9 million in the
quarter. EBITDA margin inflated 30 bps year over year to 2.4% in
the reported quarter due to increased sales and early termination
of a long-term supply agreement with a food distribution
Retail sales went up 32.0% to $180.1 million, driven by the Bag
'N' Save and No Frills supermarkets acquisitions.
Segment's EBITDA stood at $8.1 million in the quarter up 62%
from $5.0 million in the prior-year quarter. The EBITDA margin
inflated 90 bps year over year to 4.5% in the reported
Cash and cash equivalents for Nash Finch stood at $1.18
million as of Jun 15, 2013, compared with $1.3 million as of Mar
23, 2013. Long-term debt went up to $416.1 million in the quarter
from $381.4 million in the prior quarter.
Nash Finch's earnings were not very encouraging. Bottom line
declined year over year, but top line grew 9.1% in the quarter.
Moreover, a low food inflation rate continues to affect the
company as it limits the company's pricing power.
We expect lower contractual margin rates to continue to
pressurize on gross margins in the Military segment.
In Jul 2013, NAFC entered into a $1.3 billion definitive
merger agreement with leading grocery distributor
Spartan Stores Inc. (
. The agreement will
closeby the end of calendar 2013. The merger is expected to
generate $50 million annual cost synergies and involve a one-time
integration cost of $26 million within three years.
The merger is of great interest to the investors as the
combined entity will form a leading wholesale and food
distributor boasting 22 distribution centers covering 37 states
and 177 retail stores. Also, Nash Finch will be able to expand in
Michigan, Indiana and Ohio.
Moreover, the new entity is expected to earn about $7.5
billion in sales and will command a strong portfolio of private
brands like Spartan Stores' Spartan and Nash Finch's Our Family
among many others.
Currently, Nash Finch carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Investors may consider other consumer staples stocks that are
currently doing well, such as
Flowers Foods Inc. (
Tyson Foods Inc.
). Both the companies carry a Zacks Rank #2 (Buy).
FLOWERS FOODS (FLO): Free Stock Analysis
NASH FINCH CO (NAFC): Free Stock Analysis
SPARTAN STORES (SPTN): Free Stock Analysis
TYSON FOODS A (TSN): Free Stock Analysis
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