The chain is earning less while selling more. Same-store sales were up just 3.2 percent. Skinnier earnings Garden Fresh said in October that its income would be lower based on higher labor costs in both operations and maintenance, higher costs passed on by its suppliers recouping fuel cost boosts and higher utility costs in San Diego. The company has begun raising prices by 6.5 percent, but this has reduced guest counts by about 3 percent. The company said neither the price hikes nor a new marketing program would bear fruit for three to six months.
Analysts seem to concur.
The stock-watcher said Garden Fresh will battle a tight labor market and other operational issues for several quarters with a negative impact on the company and stock. But it noted that as Garden Fresh slows unit growth and focuses on new and existing stores, its margins would improve but no sooner than mid-2001, or six months from now. Garden Fresh opened 17 new stores in fiscal 2000, three fewer than planned, and said it would open just 10 stores next year, concentrating on improving same-store performance. A new program may ease their burden. Inc. All Rights Reserved.