Supermarket retailer and grocery wholesaler Fresh Brands has posted record sales of US$146.9m for its Q2 ended 13 July 2002, a 12.4% increase on the Q2 2001, due primarily to the acquisition of Dick's Supermarkets in June 2001.

Net earnings for the Q2 2002 were a record US$1.88m, an increase of 6.1% over US$1.78m for the same period in 2001. Diluted earnings per share (EPS) for the Q2 2002 were US$0.36, a 5.9% increase over diluted EPS of US$0.34 for the same period in 2001. Both sales and earnings were in line with the company's expectations to report 2002 EPS between US$1.53 and US$1.58.

"Our results have remained steady in a period that has continued to be challenging for our economy, for the grocery industry and for our business," said Elwood F. Winn, president and CEO: "Our efforts to create an exceptional shopping experience and proven abilities in loyalty marketing continue to build for us a unique competitive edge in our markets."

EBITDA for the Q2 2002 was US$5.2m, a 19.8% increase on US$4.3m in the same period of 2001. Dick's Supermarkets contributed about US$900,000 to EBITDA in the Q2 2002. As a percent of sales, EBITDA for the Q2 was 3.5% compared to 3.3% for the same period in 2001.

Retail sales for the Q2 2002 increased 25.2% to US$72.5m, compared to US$57.9m for the same period in 2001, primarily due to the acquisition of Dick's Supermarkets. Net wholesale sales for the Q2 2002 increased 2.2% to uS$74.4m, from US$72.8m last year.

For the first two quarters of 2002, net sales were a record US$331.1m, a 16.4% increase over last year's H1 sales of US$284.5m. H1 net earnings increased 4.3% to US$3.82m year on year and diluted EPS for the H1 were YS$0.73, up 7.4% on diluted EPS of US$0.68 for the same period of 2001.

"Due in large part to significant competitive activity in some markets and the continuing impact of the soft economy, same-store sales for the Q2 were flat," said Winn. "On a year-to-date basis, same-store sales have increased 0.6%. Last year, our significant sales improvement was attributable, in part, to competitive store closures in several of our markets. This year, instead of competitive store closures, we have experienced an increase in competitive store openings in several markets. In light of the competitive environment and near-term economic outlook, we anticipate same-store sales for the year to be flat."

The company's gross margin increased to 19.8% in the Q2 2002 from 17.7% for the same period last year, due primarily to the increase in retail sales mix resulting from the Dick's acquisition. Operating expenses as a percent of sales were 17.5% in the Q2 of this year compared to 15.5% in the same period of 2001. The increase in operating expenses was due, in large part, to the increase in the percentage of retail sales and in part to an increased level of depreciation related to the acquisition of Dick's.

Winn indicated that elements of the company's new flagship store in Sheboygan, Wis., continue to be incorporated into both new stores and remodelling projects, including a recently announced corporate replacement store and Pig Stop gas station in Sheboygan, which is scheduled to open in 2003. An expanded and renovated franchised store opened in Waunakee, Wis. in July. Additional openings over the next 12 months include a market `flagship' design corporate store in Kenosha, Wis., a market franchised store in Oostburg, Wis., another expanded and renovated franchised store in Mosinee, Wis., and new franchised replacement stores in West Bend, Omro, Union Grove and Howard, Wis. Winn further indicated that in addition to these store projects, the company will open its 100th store in Cambridge, Wis. this month. This franchised Piggly Wiggly store was a successful conversion from another wholesaler.

During the Q2 2002, the company repurchased 34,000 shares of its common stock at an aggregate price of US$616,000. The board of directors has authorised a US$5m increase in the company's stock repurchase programme to US$30m.

Separately, Fresh Brands' board of directors also declared a Q3 2002 cash dividend of US$0.09 per share of common stock, payable on 6 September 2002 to shareholders of record on 23 August.