Satisfied with a significant turnaround in its financial results in the fourth quarter, AML Foods will soon launch its $1.5 million Carl's Jr. franchise after hiring 65 people, a move revolving around a strategy of minimizing its reliance on price-controlled food items as a portion of its overall sales given costs of $20,000 a week for the company from "subsidizing" the sale of these loss-making goods.
Gavin Watchorn, AML Foods' president and chief executive officer, said that the BISX-listed company was pleased with its fourth quarter results, which showed net income of $1.5 million - an 85 percent increase following a "disappointing" slow third quarter in which it was hit by "a raft of tax increases that came through our supply chain".
In the most recent quarter, ending January 31, 2014, Watchorn said the company focused very much on "controllables" in an environment where business conditions were roughly the same.
"Our overall net company sales position is flat, but where we saw improved performance is our controllables, particularly our expenses and shrink, that's what we focused on," said Watchorn.
Shrink, which includes the natural attrition of inventory based on spoilage, stealing or other damage, was down by 30 percent in the fourth quarter over the same period last year, and by 20 percent last year as a whole, noted the company CEO.
"We are very pleased with the efforts we've made on that. While overall expenses have increased from a dollar perspective, as a percentage of sales, expenses have decreased," he added.
While declining to comment on the performance of individual companies within the AML Foods group, which include Solomon's Fresh Market, Solomon's Super Center, Cost Right, and Domino's Pizza, Watchorn did note that Solomon's Fresh Market has been "doing very well for us". His comments follow speculation by rival, Super Value President Rupert Roberts, that the company was suffering financially.
Watchorn said that the Carl's Jr. restaurant will open adjacent to Solomon's Super Center "very soon".
"We've hired our people and we are doing the last bits and pieces to the building."
The project has cost the company $1.5 million, but has already attracted "tremendous interest" with "a lot of people stopping by," said Watchorn.
Explaining the decision to invest in the franchise, the CEO said: "As a company we have made the strategic decision to reduce the percentage of our overall sales that price-controlled items contribute. Price control is essentially a loss-making segment of our business. Being forced to subsidize the cost of groceries is fundamentally unfair. It costs AML Foods $20,000 a week - that's the difference between our expense base and the margin we're allowed to make on those items - and over the last 24 months price-controlled items have gone from about 11 percent to 15 percent of our business.
"We don't want to give that up, but we need to reduce it as a percentage of our overall business, that's why we looked for a food franchise business that we thought would do well in The Bahamas and that would bring synergies with our existing business," said Watchorn.
The Retail Grocers Association has called on the government to increase the margin of profit retailers are able to charge for price-controlled goods, or eliminate the controls entirely.
AML Foods' earnings per share rose to $0.1 from $0.069 in the quarter. Total assets rose to $52.5 million from $53.6 million.

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