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The Nash Finch Company reported fourth-quarter 2012 earnings (excluding one-time items) of 49 cents per share substantially lower than 97 cents per share in the year-ago period. Earnings, however, surpassed the Zacks Consensus Estimate by a penny. 

Quarterly Details

Nash Finch's total sales in the fourth quarter of 2012 were $1.14 billion, down 1.6% from the year-ago quarter. The takeover of 12 Bag 'N Save stores in May 2012 and 18 No Frills stores during the quarter boosted total company sales by $35.4 million. Sales, however missed the Zacks Consensus Estimate of $1.19 billion.

Nash Finch's total comparable sales dipped 4.1% year over year in the reported quarter on account of lower sales due to regular sale/closing of retail stores.  

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the fourth quarter of 2012 declined 23.4% to $26.5 million. The EBITDA margin shrank 70 basis points to 2.3%. Selling, general and administrative expenses amounted to $84.5 million up 43.2% from the comparable prior-year quarter.

Segment Update

Military Distribution: Sales declined 5.3% year over year to $536.8 million in the fourth quarter of 2012.  

The segment's EBITDA decreased 48.5% from the prior-year quarter to $8.8 million in the fourth quarter of 2012, owing to low inflation rate and increased establishment and transaction cost of distribution centers. The EBITDA margin was 1.6% in the reported quarter, down 140 basis points from the prior-year quarter.

Food Distribution: Food Distribution sales declined 13.0% to $413.8 million in the quarter. The decrease was primarily due to the impact of the acquisition of Bag 'N' Save and No Frills supermarkets, which, however, benefited the Retail segment.

Segment EBITDA decreased 42.1% to $14.8 million in the quarter. EBITDA margin contracted 10 basis points year over year to 2.7% in the reported quarter due to inflation.

Retail: Retail sales soared 75.5% year over year to $185.0 million, driven by the benefits of the acquisition of Bag 'N' Save and No Frills supermarkets.

Segment EBITDA rose by 35.7% to $7.6 million in the quarter. The EBITDA margin shrank 120 basis points year over year to 4.1% in the reported quarter.

While the acquisition of Bag 'N Save added to retail sales, as it was a Food Distribution customer, it was also responsible for the year-over-year decrease in Food Distribution segment sales.

Total Food Distribution and Retail EBITDA increased to $13.8 million, down 15.3% from the prior-year quarter. EBITDA margin also shrank 50 basis points to 2.3% in the quarter. Overall increase in total EBITDA can be attributed to a strong impetus from the retail acquisitions and a decline in incentives.  

Full Year Results

For full year 2012, earnings (excluding one-time items of $133.5 million or $10.3 per share) of $3.03 per share were substantially lower than $3.92 per share in the year-ago period. Earnings however surpassed the Zacks Consensus Estimate by a penny. 

Nash Finch's total sales in 2012 were $4.82 billion, down 0.7% from the prior-year quarter level. The takeover of 12 Bag 'N Save stores in May 2012 and the acquisition of 18 No Frills stores during the last quarter boosted total company sales by $95.6 million. Sales were above the Zacks Consensus Estimate of $4.83 billion.

Financial Update

Cash and cash equivalents for Nash Finch were $1.3 million as of Dec 29, 2012, compared with $1.2 million as of Oct 6, 2012. Long-term debt went up to $356.3 million in the quarter from $371.1 million in the prior-year quarter.

 The company declared a regular quarterly cash dividend of 18 cents per share payable on March 22, 2013 to shareholders of record at the close of business on March 8, 2013.

We are positive about the company's top- and bottom-line growth and continuous acquisitions and have faith in its long-term prospects. We believe that the company's initiative to increase distribution of its private label products and price these private label products more competitively will boost sales in the future.

Moreover, its strategic growth plan, Operation Fresh Start is helping the company to achieve its long-term targets. However, a low inflation rate continues to hurt the company.

Currently, Nash Finch has a Zacks Rank #3 (Hold). Investments to consider include The Jeronimo Martins (JRONY), Safeway Inc. (SWY - Analyst Report) or Koninklijke Ahold N.V. all of which carry a Zacks Rank #2 (Buy).

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