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Nash Finch 1Q13 Earnings Beat by 43%

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The Nash Finch Company reported first-quarter 2013 earnings (excluding one-time items) of 20 cents per share, which is 57.4% lower than 47 cents per share in the year-ago period. Earnings, however, surpassed the Zacks Consensus Estimate by 42.9%.

Quarterly Details

Nash Finch's total sales in the first quarter of 2013 were $1.09 billion, up 2.3% 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 $35.0 million. Sales, however, missed the Zacks Consensus Estimate of $1.19 billion.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter of 2013 declined 22.2% to $18.6 million. The EBITDA margin shrank 50 basis points (bps) to 1.7%. Selling, general and administrative expenses amounted to $75.1 million up 28.8% from the prior-year quarter.

Segment Update

Military Distribution: Sales declined 0.4% year over year to $532.0 million in the first quarter of 2013.

The segment's EBITDA decreased 41.0% from the prior-year quarter to $7.9 million, owing to the decline in gross margin related to reduced contractual margin rates, low inflation and higher transportation cost. The EBITDA margin was 1.5% in the reported quarter, down 100 bps from the prior-year quarter.

Food Distribution: Food Distribution sales declined 11.0% to $385.3 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’s EBITDA decreased 50.8% to $3.2 million in the quarter. EBITDA margin contracted 70 bps year over year to 0.8% in the reported quarter due to inflation.

Retail: Retail sales went up 72.1% to $176.9 million, driven by the benefits of the acquisition of Bag 'N' Save and No Frills supermarkets.

Segment’s EBITDA stood at $6.6 million in the quarter compared to $2.9 million in the prior-year quarter. The EBITDA margin inflated 90 bps year over year to 3.7% 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.

Financial Update

Cash and cash equivalents for Nash Finch stood at $1.2 million as of Mar 23, 2013 compared with $1.3 million in the prior quarter. Long-term debt went up to $381.4 million in the quarter from $356.3 million in the prior-year quarter.


Nash Finch’s earnings results were not very encouraging. Bottom line suffered year-over-year decline, while top line delivered modest growth of 2.3% in the quarter. Moreover, a low food inflation rate continues to affect the company as it limits the company’s pricing power.

We are continuing to see pressure on gross margins in the military segment from lower contractual margin rates.

Currently, Nash Finch carries a Zacks Rank #4 (Sell).

Other Stocks to Consider

Investors may consider other Consumer Staples stocks that are currently doing well. Flowers Foods Inc.(FLO - Free Report) and Green Mountain Coffee Roasters Inc. carry a Zacks Rank #1 (Strong Buy) and Kraft Foods Group Inc. carries a Zacks Rank #2 (Buy).

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