Supermarket retailer and grocery wholesaler Fresh Brands has reported record sales and earnings for the Q1 2002 ending 20 April 2002.

Net sales for the Q1 2002 were a record US$184.1m, a 19.7% increase over last year’s Q1 sales of US$153.8m, due primarily to the acquisition of Dick’s Supermarkets. Q1 net earnings were a record US$1.94m, an increase of 2.6% over net earnings of US$1.89m for the same period in 2001. Diluted earnings per share for Q1 2002 were a record US$0.37, an 8.8% increase over diluted earnings per share of US$0.34 for the same period in 2001.

“Although below our expectations, we are pleased to report record results in the Q1 2002, which has proven to be a challenging period for our economy, our industry and our marketplace,” said Elwood F. Winn, president and CEO. “We believe that our strategy to grow by adding additional brands and expanding our geographic reach, our innovative flagship store design and our proven ability to build strong customer relationships through our loyalty marketing efforts give us a unique competitive edge in our markets.”

EBITDA for the Q1 2002 was US$6m, a 33.3% increase from US$4.5m in the same period of 2001. Dick’s Supermarkets contributed about US$1m to EBITDA in the Q1 2002. As a percent of sales, EBITDA for the quarter ended 20 April 2002 was 3.3% compared to 3% for the same period in 2001.

Retail sales for the Q1 2002 improved 47.8% to US$92.5m, compared to US$62.6m for the same period in 2001 primarily due to the acquisition of Dick’s Supermarkets. Net wholesale sales for the Q1 2002 increased 0.4% to US$91.6m, compared to US$91.2m last year.

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“The key factor in our retail sales improvement came from the addition of the Dick’s Supermarkets chain, which was acquired in June 2001,” Winn said. “Dick’s Supermarkets contributed US$29.2m to net retail sales in the Q1 2002. Our sales improvement also benefited from the opening of a new corporate replacement store in Zion, Illinois, in January 2002, which is experiencing dramatic increases in sales over last year. For our Piggly Wiggly franchise and corporate retail chain, same store sales for the Q1 2002 increased 1.1%, compared to the same period in 2001.”

“We attribute the relatively low increase in same-store sales for our Piggly Wiggly stores to two factors – increased competition in some markets and the impact of the soft economy and increased unemployment on discretionary spending,” Winn said. “While customer counts at our stores continue to increase as a result of our successful marketing programmes, we are finding that customers are being more discriminating buyers and average transaction amounts are down. We are confident in our programmes and direction and believe we will be able to achieve same-store sales increases that are closer to our targeted rate of 2.0% as the economy improves and our markets stabilise.”

“Our gross margin increased to 19.5% in the Q1 2002 from 16.9% for the same period last year, primarily due to the Dick’s acquisition. Operating expenses as a percent of sales were 17.5% in the Q1 of this year compared to 15% 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 that related to the acquisition of Dick’s.

“Interest expense also increased by about US$500,000 in the Q1 as a result of the Dick’s acquisition. We continue to focus on controlling costs throughout our operations.”

Winn indicated that the new state-of-the-art corporate flagship store in Sheboygan, Wisconsin, was opened in August 2001. Over the next 12 months, the company expects additional openings including a new market corporate store in Kenosha, a new market franchise store in Oostburg, two expanded and renovated franchise stores in Waunakee and Mosinee, and new franchise replacement stores in West Bend, Omro, Union Grove and Howard, all in Wisconsin.

“Looking ahead, our goal continues to be to achieve a 15% compound annual growth rate in sales over the next five years,” Winn added. “We expect that our earnings for 2002 will be on the lower end of the range of US$1.60 to US$1.75 per share.”

Separately, on 12 March 2002, Fresh Brands’ board of directors declared a Q2 2002 cash dividend of US$0.09 per share of common stock. The dividend is payable on 7 June 2002 to shareholders of record on 24 May 2002.

During the Q1, the company repurchased 51,000 shares of its common stock at an aggregate price of US$924,000. At the end of the quarter, about US$1m remained available from the company’s current Board-authorised US$25m share repurchase plan.