Nash Finch shares sag after write-down

  • Article by: MIKE HUGHLETT , Star Tribune
  • Updated: July 19, 2012 - 9:29 PM

The results beat Wall Street expectations on a day of weakness for grocery stocks.

Nash Finch Co.'s stock sunk almost 8 percent Thursday after the company posted an $85 million quarterly loss because of a large asset write-down and revealed new details of a recent retail grocery expansion.

The stock's fall came on a day of investor wariness of the supermarket sector generally, as large grocery operator Safeway reported a dip in profits.

Edina-based Nash Finch, which is primarily a grocery wholesaler, reported a net loss of $6.55 per share compared with a profit of 77 cents for the same quarter a year ago.

Stripping out one-time charges, Nash Finch reported adjusted quarterly per-share earnings of 69 cents. Thomson Reuters interpreted Nash Finch's adjusted earnings at 63 cents per share, though that still beat analysts' average estimate of 59 cents per share.

Nash Finch recorded second quarter sales of $1.09 billion, down from $1.1 billion a year ago, but topping analysts' estimates of $1.08 billion.

Shares closed at $19.49, down $1.64, hitting a 52-week low along the way.

During the quarter, the company took a noncash impairment charge of $96.9 million to write off the value of goodwill in its food distribution and retail supermarket segments. Goodwill is an intangible asset that can reflect the value of a brand or a previously acquired firm.

"The goodwill impairment charge resulted from having a depressed stock price during this down economy," Nash Finch CEO Alec Covington said in a news release.

Nash Finch's stock is trading at about half of where it was a year ago, as competition in the food industry has intensified against the backdrop of a weak economy.

Last week, Eden Prairie-based Supervalu Inc., a rival grocery wholesaler and retailer, announced it was putting itself up for sale after years of continuing declining sales.

And Thursday, Safeway, another large grocery operator, reported a 16 percent profit decline, sending its shares down 4 percent. Supermarket stocks generally were down Thursday.

Nash Finch's business is roughly split between distributing groceries to U.S. military bases and a traditional wholesale grocery operation, the latter of which also includes some company-owned retail food outlets.

This spring, Nash Finch announced the purchase of two Nebraska supermarket chains, making it the No. 2 player in the Omaha retail grocery market. First, it bought Bag N' Save for nearly $30 million in cash. Then in May, it announced the acquisition of No Frills Supermarkets.

The company paid $47 million for No Frills, according to a federal securities filing Thursday, deal funded by debt. Covington told analysts that a net $40.9 billion in debt will be added to Nash Finch's balance sheet.

Mike Hughlett • 612-673-7003

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