The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

AML Foods is expressing concern that Freeport’s “awful” economy could drag down previously strong sales growth, its chief executive saying reports of the city’s unemployment levels were “staggering”.

Gavin Watchorn said the BISX-listed food retail and franchise group viewed Freeport, where it operates five stores, as its sole concern following Hurricane Matthew and the subsequent hotel closures.

“The only area we’re looking at with some concern is Freeport,” he told Tribune Business. “We’re kind of looking at it glass half full. We’re still predicting overall positive numbers in the market, but Freeport is concerning.

“The economy is just awful up there. I don’t think there’s any other way to put it. When you speak to people on the ground, the level of unemployment is staggering.”

Mr Watchorn said the impact was not confined to the 591 workers terminated when Memories closed, and the hundreds of Grand Lucayan workers still on reduced or no work weeks, but those engaged in tourism support services, such as taxi drivers, restaurants and the Port Lucaya Marketplace’s retail offering.

“Our sales are positive, but not as strong as they were six to nine months ago,” the AML Foods chief executive added. “That’s largely driven out of Freeport.

“Freeport is very challenging for businesses and residents. Our sales for the market are up, but not as strong as they were prior to the hurricane.”

AML Foods has two Domino’s Pizza locations in Freeport, along with two Solomon’s “neighbourhood” style food stores and one Cost Right site.

Prime Minister Perry Christie attempted to give Freeport’s residents and private sector hope at last Thursday’s Business Outlook conference, talking up the bid from Canadian real estate developer, the Wynn Group, to acquire the Grand Lucayan - including the former Memories property.

What was absent from his speech, though, was any mention of how the Grand Lucayan’s owner, Hutchison Whampoa, was reacting to the ‘new and improved offer’ by Wynn, and if it is prepared to exit at terms and a price acceptable to the purchaser.

Tribune Business sources yesterday suggested that the potential deal “remains on”, but that is unlikely to ease the fears of companies such as AML Foods in the short-term.

“We’re concerned in the short to medium-term if some of the hotels do not re-open,” Mr Watchorn reiterated. “We’re concerned about what it may do for our numbers.”

The AML Foods chief was speaking following a Christmas quarter in which Nassau continued to drive its business, with net income for the three months to end-January 2017 up 43.8 per cent year-over-year at $3.078 million.

Sales were ahead by 3.3 per cent, standing at $42.467 million for the quarter as compared to $41.096 million the year before.

The improved bottom line was driven largely by higher margins, as AML Foods’ ‘cost of sales’ remained largely flat year-over-year, while sales, general and administrative expenses rose by just under $350,000.

This enabled most of the sales increase to drop to the operating and net income level, and Mr Watchorn confirmed that the quarter to end-January was “pretty much on target” with the BISX-listed group’s expectations.

He added that AML Foods had yet to determine how it would use its recently-acquired 4.5 acre site on Charles W Saunders Highway, which is located on the opposite side to Superwash, near to Sir Lynden Pindling Estates and the Sadie Curtis primary school.

The company’s message to shareholders said the property, which was acquired for $3 million, would be used for expansion, as it takes AML Foods into an area of New Providence it does not directly serve.

“We’re examining our options. There’s a couple of things we can do down there,” Mr Watchorn said. “We’ve secured the site, but we haven’t determined what’s best for it right now.

“We have an opportunity to serve a location we currently don’t serve. We don’t serve the southern shores of New Providence at all.”

The Charles W Saunders land purchase was financed from a $7 million Royal Bank of Canada (RBC) loan facility, the balance of which will help to fund additional capital spending.

Mr Watchorn said the remaining RBC facility would likely be held in reserve in case AML Foods needed it to finance completion of its $10.4 million Solomon’s Yamacraw store.

He told Tribune Business that the BISX-listed group had already invested $4 million in the project to-date, with construction both on budget and on target for a November 2017 opening opposite St Andrew’s School.

“Yamacraw is coming along really well,” Mr Watchorn said. “We’ll be putting the roof on the building soon enough; within the next couple of weeks.

“We believe that we will be able to finance Yamacraw out of cash flows. We will put those funds together with RBC in case we need it. We don’t expect to need it for Yamacraw, but it’s [the loan] there if it’s needed or if something else comes up in the meantime.”

Mr Watchorn said AML Foods’ ongoing operational strategy is “to focus on what we can control”, and seek to drive internal efficiencies and cost savings in a still-tepid economy.

He added that reducing inventory shrinkage, and improving customer satisfaction through reducing “out of stock” items, were key performance targets for AML Foods.

“We’re doing an excellent job on shrinkage. Our shrinkage is at the best level we’ve ever had,” Mr Watchorn told Tribune Business. “We’ve recorded our lowest ever shrinkage level, and it continues to move down.

“That’s helping to offset sales numbers that are not as strong as they were at the beginning of the year.”

He added that AML Foods’ third Carl’s Jr location on Carmichael Road had been “spot on” in terms of its initial performance, with the opening not ‘cannibalising’ existing sales as expected.