INDIANAPOLIS -- Three months after hiring an investment firm to help it restructure and cut costs, Marsh Supermarkets yesterday announced several steps it plans to take to improve profits, including closing six underperforming Village Pantry convenience stores. The board of directors also reported that a review of the Indianapolis-based company's store base and expense structure would be ongoing.
This is a time when the company's management needs to focus their efforts on restructuring the company's operations, reducing costs and improving profitability, [image-nocss] the board said in a statement. We recognize that these efforts will require sacrifices at many levels, and it is important that the company's management lead the way.
The board has elected William L. Marsh interim president and COO. It also announced a reduction in force of approximately 25 employees at the headquarters office, including four officers: David A. Marsh, president and COO; Arthur Marsh, executive vice president of mergers and acquisitions; Don Marsh Jr., vice president of specialty procurement; and Joseph Heerens, senior vice president of political affairs.
We believe the changes in management are critical to the company's transformation, the board said.
In addition to the staff reduction, the company will reduce travel and overhead at the headquarters and close the Marsh Supermarket in Fort Wayne, the Savin*$ Store in Muncie, six Village Pantry c-stores (four in Indianapolis and two in Anderson, Ind.) and the Trios Di Tuscanos restaurant in Noblesville, Ind., by the end of the month.
Collectively, these actions are expected to save the company more than $12 million annually. Previously, the company announced the termination of the supplemental executive retirement plans that will reduce expenses by $3 million to $4 million annually.
When Marsh announced it had retained Merrill Lynch & Co. to investigate strategic alternatives, including a possible sale, it was speculated that the company might sell off the entire Village Pantry chain, which then included 160 stores. Subsequently, two possible buyers rose to the surface: O'Hara, Pa.-based Giant Eagle Inc. and Canada's Alimentation Couche-Tard.
While attempts to reach Village Pantry for comment were unsuccessful yesterday, a source with the c-store chain told CSP in January that the chain is doing well and has not entered into any sale negotiations.
Marsh hired Merrill Lynch after it reported a net loss of $3.4 million for the second fiscal quarter ended October 15. Following the changes outlined above, the company expects to incur a fourth-quarter charge for future cash expenditures of $5.8 million to $6.8 million related to the reduction of jobs at the company's headquarters.
Upon closing of the stores, the company expects to record an additional charge for future cash expenditures of $6 million to $10 million ($3.9 million to $6.5 million net of tax), primarily related to future lease payments. The company will also record a noncash impairment charge in the third quarter of approximately $12.8 million before tax ($8.4 million after tax). These noncash charges are related to the stores to be closed as well as other store locations and will bring the book value of these assets in line with their fair market value, as well as account for differences between future lease payments and expected subleases.
Marsh operates 69 Marsh supermarkets, 38 LoBill Food stores, eight O'Malias Food Markets, 154 Village Pantry convenience stores and two Arthur's Fresh Market stores in Indiana and western Ohio. The company also operates Crystal Catering Food Services, which provides upscale catering, cafeteria management, office coffee, coffee roasting, vending and concessions, and Primo Banquet Catering and Conference Centers; Floral Fashions, McNamara Florist and Enflora-Flowers for Business.
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