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Alco stays focused following Q4 results


Expenses associated with a rejected merger with Argonne Capital Group and the planned closing of more than a dozen stores took a chunk out of broad-line retailer Alco’s fourth quarter results.

Net sales from continuing operations during the quarter decreased 8.9% to $130.9 million, compared to $143.6 million in the fourth quarter of fiscal 2013, which had an additional week. Excluding the 14th week of the fiscal 2013 quarter, net sales from continuing operations decreased 4.7%.

Same-store sales, excluding fuel centers, decreased 11.7% to $124.8 million during the quarter. Excluding the 14th week of the fiscal 2013 quarter, same-store sales, excluding fuel centers, decreased 7.6%.

Net loss for the fourth quarter of fiscal 2014 was $8.6 million, or $2.65 per diluted share, compared to a net income of $2 million, or $0.61 per diluted share, for the fourth quarter of fiscal 2013. Results in this year’s fourth quarter included impairment charges of $1.4 million associated with the planned closing of 14 stores during fiscal 2015, $0.5 million for costs associated with the relocation of the headquarters to Coppell, Texas, and $0.1 million in expenses attributable to the rejected merger with Argonne Capital Group.

"Fiscal year 2014 operating results reflect the impact of significant change and disruption to our business. Most important, we took steps to fix long-term problems that have hurt Alco’s profitability while dealing with the events associated with the proposed merger that was rejected,” said president and CEO Richard Wilson. “We recorded approximately $2.4 million in merger-related costs and approximately $1.1 million of headquarters relocation costs. During the year, Alco decided to close 22 underperforming stores, and the last of those stores will be closed by the end of the first quarter of fiscal year 2015. We also experienced a net reduction in gross margin dollars of approximately $10 million, primarily due to increased promotional activity in an attempt to reduce inventory and to comparison with the 53-week year in fiscal 2013. Finally, we recognized a large non-cash charge relating to the accounting for deferred tax assets on the company's balance sheet."

Moving forward, the company plans to remain focused on executing five major initiatives to improve profitability and deliver value for shareholders. These actions include:

  • Maximizing the benefit of its headquarters relocation to the Dallas area, which is enabling Alco to recruit experienced managers, buyers and marketers from some of the nation's top retail organizations. Wilson added that the company’s new team is largely in place.

  • Expanding gross margins by completing the price optimization initiative with Revionics, which benefits top-line sales and gross margin by adjusting prices store-by-store and item-by-item based on detailed demand data.

  • Improving its real estate portfolio by closing unprofitable stores and opening more productive ones. At the end of fiscal year 2014, Alco had closed or were in the process of closing 22 underperforming stores, and opened three high-performing locations in regions with growing energy-based economies.

  • Upgrading its information technology with a new Enterprise Resource Planning system and a new supply chain service provider.

  • Reducing inventory and associated debt levels by, in addition to the store rationalization and IT upgrades mentioned, making a number of targeted changes in store layout and merchandise mix to appeal to shoppers.

Alco is primarily located in small underserved communities across 23 states. The company has 198 stores that offer both name brand and private label products at reasonable prices.

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