Farm Fresh Inc., a closely-held, Norfolk-based supermarket chain, is going public in a bid to raise $19.5 million to fund a major expansion program.
The company is offering 1 million shares of common stock to raise most of the money to add five new stores to its current chain of 25 outlets in Virginia and North Carolina. Other expansion funds are expected to come from product sales and gains from marketable securities, according to a preliminary prospectus of the offering.
Some of Farm Fresh's principal stockholders are selling an additional 1 million shares of common stock; but the company will not receive any of the proceeds from shares offered in this category.
The public offering is the first in Farm Fresh's 26-year history. The expansion program is the company's most ambitious project--undertaken after five consecutive years of significant sales gains.
"We believe this is a good time to expand," said A. Kent Little, Farm Fresh's comptroller. "We've been very successful in the last five fiscal years. We feel that we can take advantage of that and grow," Little said.
Farm Fresh's net earnings increased from $1.6 million (31 cents a share) in 1978 to $5.4 million ($1.06) in the fiscal year ending Jan. 1, 1983. Sales increased from $108.5 million in 1978 to $265 million in the latest fiscal year. Company officials attribute the sales gains to "increased volumes of merchandise sold because of the opening of additional larger stores and the expansion of existing store selling space."
Farm Fresh grew from 19 to 24 stores in the past five years and, in the process, increased its selling space from 315,800 square feet to 616,400 square feet. The latest expansion program, to take place over the next two years, is designed to increase the company's selling space by 54 percent, according to the stock-offering prospectus.
Company officials said the expansion program also would create 1,000 jobs, including an estimated 600 at its stores in southeastern Virginia. Twenty-one Farm Fresh stores are located in Virginia's Tidewater area. Two other Farm Fresh stores are in Richmond, and two more are in North Carolina.
Farm Fresh currently has 3,000 employes, about 40 percent of whom work full-time. Permanent full-time employes over age 25 and with one or more years of service participate in a profit-sharing program. The company has no union, according to the prospectus.
"The company believes its employe relations are satisfactory and that employe loyalty and enthusiasm are a key element of the company's operating performance," the prospectus said.
A marketing strategy, "designed to obtain high per store sales volume and significant market penetration in a particular trade area," is another key element in that success, the prospectus said.
Farm Fresh operates 11 "combination stores" that include full-line pharmacies, cafeterias, fresh fish markets, floral boutiques, book stores and other general merchandise departments, in addition to traditional supermarket sections. Other Farm Fresh units, called Super Saving Centers, include leisure wear shops. Sales of non-traditional merchandise grew from 16 percent in 1978 to 20 percent in 1982, substantially increasing Farm Fresh revenues because the non-traditional items generally have a higher profit margin, company officials said.