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Fresh Brands Sales, Profits Up in Q1

SHEBOYGAN, Wis. -- Fresh Brands, Inc.'s first quarter of fiscal 2005 showed net sales up to $198 million compared to $196 million.

Income from continuing operations was $212,000, or $0.04 per diluted share, for the first quarter of 2005 compared to a loss from continuing operations of $696,000, or $0.14 per diluted share, for the first quarter of 2004.

Also during the period ended April 23, 2005, Fresh Brands' net income was $212,000, or $0.04 per share vs. a net loss of $1,694,000, or $0.34, in the same period last year. The net loss for 2004 included the operating losses and the loss on disposal of several corporate stores that were closed or sold in 2004.

"We are pleased to report our third consecutive profitable quarter as we begin to realize the benefits of having closed or sold several of our underperforming corporate and franchise stores and as we continue to focus on establishing our value proposition," said Louis Stinebaugh, Fresh Brands' president and c.o.o.

"Overall, we are pleased with the early results of our value proposition. We had competitive openings in three of our corporate store markets that offset some of the sales gains for the corporate group. In addition, a competitive opening affected sales in two of our consolidated franchise stores that gave rise to the overall decrease for that group of stores," said Stinebaugh.

During the latest quarter, Fresh Brands completed several initiatives that Stinebaugh said should have significant payoffs in the future, including completing the integration of the redundant management functions for Dick's Supermarkets and the closure of one of its three corporate stores in Sheboygan that was incurring significant operating losses.

Pointing to significantly improved liquidity during the first quarter, Stinebaugh said the company's operating cash flow remains strong as it works to carefully manage working capital levels and capital expenditures.

"As a result, we were successful during the quarter in reducing our borrowings under our credit facility by $2.7 million to $17.6 million and increasing our availability under the facility by $4.0 million to $13.7 million," said John Dahly, Fresh Brands' e.v.p. and c.f.o.

The company's wholesale revenues decreased by $6.1 million, or 4.2 percent, in the first quarter of 2005 compared to the first quarter of 2004, primarily due the store closures or sales during the past year. Operating performance improved significantly, however, based on a reduction in promotional costs compared to 2004 when it incurred significant promotional costs to increase retail sales. In addition, in 2004, the company incurred a $1.3 million lease exit charge related to the closure of one of its franchise stores.

The company's corporate store sales decreased by $6.5 million, or 7.5 percent, in the first quarter of 2005 compared to the first quarter of 2004 principally due to the sale of two of the company's corporate Piggly Wiggly stores last September to a new franchise, which is now included in its franchise retail segment.

The retailer/wholesaler currently has 77 franchised and 20 corporate-owned supermarkets operating under the Piggly Wiggly and Dick's banners in Wisconsin, northern Illinois and Iowa; it also owns two corporate convenience stores, all of which are served by two distribution centers and a centralized bakery/deli production facility.
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