U.S. Foodservice plans to close center, cut jobs

Company hopes moves boost stock, stem losses

Food distribution

February 15, 2000|By William Patalon III | William Patalon III,SUN STAFF

U.S. Foodservice, the Columbia-based food distributor whose stock price has fallen on concerns about growth, plans to close its San Francisco distribution operation and cut jobs elsewhere as it tries to reinvigorate the price of its shares.

The decisions to close the distribution center and cut jobs were both listed in a Feb. 10 filing made with the Securities and Exchange Commission in Washington and come less than a month after the company's second-quarter earnings disappointed analysts.

The company, the nation's second-largest distributor of foods to businesses, restaurants and schools, had told analysts Feb. 1 that it might consider shutting down its operation in San Francisco, where it has been losing money.

After subsequently completing a review of its West Coast problems, the decision was made to shut down the unit there, said U.S. Foodservice spokeswoman Bonna Walker.

"We had [already] been working on options," Walker said.

The shutdown will be made during the third quarter, and the company said it will help customers make the move to another distributor.

Kurt Funderburg, an analyst with Ferris Baker Watts in Baltimore, said the decision was the correct one to make, given that the losses there are hurting the overall financial performance of U.S. Foodservice so severely.

"This unit was not only not making the margins that the company's used to making, it was actually losing money," Funderburg said. "If it's true what they said, nothing seemed to work" to bring it around to profitability.

Increasing overall profitability is also one goal of the job cuts, U.S. Foodservice revealed in an SEC filing. Boosting efficiency is the other. U.S. Foodservice said it's looking to cut jobs throughout the company.

Walker, the company spokeswoman, said no specific number of job reductions had been released by the company. But Funderburg, the analyst, said he believed the cuts would number roughly 200 -- and would involve everything from a few employees at corporate headquarters to some working in the actual distribution part of the business.

"They're looking for ways to control costs, to do business in a more effective way," he said.

U.S. Foodservice shares closed yesterday at $12.3125, down 68.75 cents, well off their 52-week high of $26.3438.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.