Food Lion sales down since TV report

December 04, 1992|By Bloomberg Business News

SALISBURY -- Food Lion Inc. yesterday attributed a 9.5 percent decline in same-store sales to allegations raised in an ABC-TV expose on Nov. 5 that purported to show widespread unsanitary practices at the company.

The Salisbury, N.C.-based supermarket chain said the decline would "negatively impact" fourth-quarter earnings, but it did not say how much.

Total sales in the four-week period that ended Nov. 28 fell 1.4 percent, to $501.7 million from $508.6 million. Year-to-date, the company posted a same-store sales increase of 0.1 percent. Total sales for the 48-week period increased 10 percent, to $6.5 billion from $5.9 billion, as the number of supermarkets increased to 977 from 871 a year ago.

Food Lion said its sales were hit hardest in the days immediately after the ABC broadcast and have begun to recover.

Analysts, who had been expecting a decline in November sales, expressed surprise at the magnitude of the drop.

"I didn't think it would go down that much," said Merrill Lynch's Scott Waltmann.

"I think this will be viewed as a big negative. I'm not lowering my [fourth-quarter] estimates, because I was already low on the Street, with 9 cents a share. I suspect others will cut theirs."

Food Lion earned 13 cents in the fourth quarter of 1991. A survey of 10 analysts by Zacks Investment Research produced a mean estimate of 14 cents a share for the current quarter.

The ABC report, which aired for 30 minutes on "PrimeTime Live," included footage, taped with a hidden camera, of employees serving spoiled food and failing to maintain clean stores.

Food Lion has filed suit against the network's parent company, Capital Cities/ABC, alleging that the show's producer engaged in deceitful and illegal activities. ABC officials have said they stand behind the story.

Food Lion's A and B classes of stock tumbled the day after the program aired, and more than 25 million shares of Food Lion stock traded in the next week. Since then the shares have rebounded only slightly. Analysts are divided on the company's chances to bounce back from the damaging program.

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