Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, February 12, 1993 TAG: 9302120227
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: SANDRA BROWN KELLY STAFF WRITER
DATELINE: LENGTH: Medium
LION'S PROFITS DOWN
The impact of a November television show alleging Food Lion Inc. had unsanitary practices and sold spoiled food showed up in dollars and cents Thursday when the North Carolina supermarket chain reported 1992 financial results.Food Lion's net earnings for its fourth quarter ended Jan. 2 fell 55 percent, to $27.3 million from $60.8 million in 1991. For the full year, profits dropped 13.2 percent, to $178 million from $205.2 million.
The grocer said net sales for the quarter were $2.3 million, up 12 percent from $2 million in 1991's final quarter. Sales for the year were up 11.8 percent, to $7.2 billion from $6.4 billion, but that included an extra week in 1992.
The most telling figures - those for sales at stores open at least a year - fell 0.4 percent for the year and 3.8 percent for the quarter.
Food Lion stock also has taken a beating since ABC-TV's "PrimeTime Live" show Nov. 5. The common stock, which was trading at the time in a range of $10 to $11 a share, has hovered below $8 a share for the past 2 1/2 weeks.
However, Food Lion's board of directors Thursday declared a regular quarterly cash dividend of 2.2 cents a share for class A stock and 2.15 cents a share for class B, payable March 16 to owners who hold stock by Feb. 25.
"The stock is down because there's still some serious question about how many people have returned to Food Lion and what the full impact will be of that television show," said George Brammer of A.G. Edwards brokerage firm in Roanoke.
Brammer said it could take "many months" before the stock price recovers. "Food Lion is out of favor, but it's a good company."
Food Lion also has been under investigation by the U.S. Department of Labor for possible overtime and child labor violations. The United Food & Commercial Workers Union has been collecting consumer and employee complaints against the nonunion company, which operates 1,012 stores in 14 states.
Tom Smith, CEO and president, said that in view of the "unprecedented number of challenges" faced by the company in the past year, he was pleased to be able to report what it did.
The company increased its promotion and advertising efforts and cut prices in the wake of bad publicity. That reduced its profit margin from 3.19 percent in 1991 to 2.47 percent last year, Smith said.
He also said the company will move in "an aggressive, yet prudent, manner" to face the challenges. He said Food Lion plans to open 110 stores in 1993 and renovate and expand existing stores.
One renovation that is coming to every store, said spokesman Mike Mozingo, is a window that allows shoppers to see into the meat departments. The meat-preparation areas now are concealed behind mirrors.