Grand Union Progress Detailed in Security Analysts Meeting; Company Reviews Five-Year Business Strategy
NEW YORK--(BUSINESS WIRE)--Nov. 19, 1998--At a meeting with analysts and investors in New York City, The Grand Union Company (Nasdaq:GUCO) today outlined the Company's five-year business strategy and discussed its improving financial performance and positive outlook.
Under the leadership of its senior management team, the Company is repositioning itself for sustained profitability and long-term growth.
Calling the Company the "New Grand Union" to reflect the many changes made over the past year, Chairman and Chief Executive Officer J. Wayne Harris told the analysts and investors, "It is truly remarkable to see how far we have come since this time last year. In a very short period of time, we have positioned The Grand Union Company to be one of the more successful companies in the Northeast with a real upside for the Company's shareholders, employees and very loyal customer base.
"Grand Union is now financially healthier than at any time in the past ten years," he said.
Harris outlined the six key initiatives in the Company's business plan, including: building sales, making intelligent capital investments, increasing the store base, continuing to reduce expenses, utilizing technology effectively, and achieving bottom-line results that will build shareholder value. He then introduced his senior management team, consisting of executives with an average of nearly 25 years with some of the nation's most successful food retailers, to elaborate on the details of the Company's business plan. All senior managers have joined the Company within the last 20 months.
Harris said he was especially pleased with second quarter performance which was announced Tuesday. Grand Union reported significantly improved pro forma second quarter results, including EBITDA (earnings before interest, taxes, depreciation, amortization, unusual and extraordinary items) of $27.3 million -- more than double the previous year's second quarter results.
"We had positive comparable store sales in all three operating divisions, including the Northern Division where we have witnessed a solid turnaround in sales and profits," he said. "EBITDA performance was solid in all three divisions with improvement each period during the quarter. In addition, gross margin improved by 131 basis points versus a year ago. Operating and administrative expenses continued to decline as a percentage of sales, dropping 50 basis points from 25.2% in the first quarter to 24.7% in the second quarter. This represented a 135 basis point reduction from last year."
"Furthermore," Harris said, "we continue to perform ahead of our five-year business plan."
President and Chief Merchandising Officer Gary M. Philbin discussed the Company's progress in merchandising and sales promotion and the benefits of its greatly strengthened vendor relationships, all of which have begun to demonstrate positive results. Philbin said many of the Company's new marketing initiatives have been funded by reinvestments from savings achieved through companywide expense control efforts.
Grand Union Vice Chairman and Chief Administrative Officer Jack W. Partridge described the Company's aggressive, $290 million capital development program, which will touch 80% of the Company's store base through remodels and result in more than 30 new stores over the next 4 1/2 years.
"Strategic capital investments will play a key role in enhancing our competitive position," said Partridge, discussing the Company's dynamic new store prototypes and alternative formats, as well as investment in new technology to further increase store efficiency and improve customer service.
Executive Vice President and Chief Financial Officer Jeffrey P. Freimark reviewed the Company's new, improved capital structure and steadily improving financial results. Freimark told analysts that, "Our recent restructuring has provided us with an extremely healthy capital base. We've removed $595 million in debt from the balance sheet, freeing up $71 million in annual cash interest payments for reinvestment to the Company."
Freimark said the Company has experienced four consecutive quarters of declining operating and administrative expense with a decline of 5.1% on a year to year basis representing 135 basis points as a rate of sales. He said, "We expect to demonstrate continuing improvement in SG&A expenses as expense control is being imbedded within the culture of the Company."
Freimark told the analysts that the Company plans to spend $135 million over the next two years on capital development. He said the Company's store base is expected to grow from 221 today to 239 five years from now. "While the store count will increase by a net of 8%," he said, "square footage will grow by approximately 25 to 30%." |
