We reiterate our neutral recommendation on
Nash Finch Company
) as the company continues to face the peer pressure in its
The company's second-quarter 2012 earnings (excluding one-time
items) of 69 cents per share plunged 25.0% from prior-year
quarter's earnings of 92 cents per share, due to the ongoing
macro-economic headwinds and increasing competition. Moreover,
total comparable sales dipped 1.5% year over year in the reported
quarter, due to the impact of lower sales due to regular
sale/closing of retail stores.
However, we are encouraged by the company's long-term initiatives,
which seems well on track to achieve the long-term targets set at
the time of the launch of its strategic growth plan 'Operation
Moreover, Nash Finch continues to build long-term relationships
with local players, owing to which the company can gain market
share and establish a leading position in the particular regions.
The company acquired 'Bag n Save' supermarkets and 'No Frills'
supermarket in the Omaha region during May 2012, which has already
contributed to the year-over-year growth in retail sales during the
first half of 2012.
The private label program started by the company in April 2012 is
aimed at increasing the penetration of its private label products
like Our Family or Value Choice or Nash Brothers Trading (a natural
and organic line) and thus reduce competition.
However, the military segment, which is an important part of the
company's business, is facing increased competition which is
exerting pressure on the company's profit.
Nash Finch is vulnerable to a weak U.S. economy and declining
consumer spending in the U.S. markets because the company has no
stores outside the U.S. and does not have an international presence
to serve as a buffer to fluctuations in the U.S. economy.
Based in Minneapolis, Minnesota, Nash Finch Company is a wholesale
food distributor in the U.S. Currently Nash Finch carries a Zacks
#2 Rank (short-term Buy rating). Close peers including
) provides special services to the commissaries.
NASH FINCH CO (NAFC): Free Stock Analysis
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