US food distributor Performance Food Group has posted lower quarterly net earnings despite a 15% increase in sales.

The company reported net earnings of US$7.5m, or 16 cents per share, for the first quarter to 3 April, compared to $16.4m, or 35 cents per share, in the year-ago period. Net sales increased to $1.47bn from $1.27bn a year earlier.

Performance Food said the decline in earnings was a result of previously disclosed operational challenges, such as higher food prices and costs of a labour dispute.

The company’s results were impacted by incremental costs of approximately $1.8m associated with a labour dispute that began late in 2003. Performance Food said it was continuing to negotiate with employees in the hope of reaching a mutually satisfactory agreement. The company expects costs related to the dispute to continue into the second quarter of 2004.

The company said sales of its salads had continued to grow, and its fresh-cut fruit business showed promise due to McDonald’s roll-out of the Apple Dipper product and the test of the new Fruit ‘n Walnut Salad.

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“While the second quarter anticipates a significant continued improvement in our business, we continue to expect earnings per share to be in the range of $0.50 to $0.54 for the second quarter of 2004,” the company said.