Rex Stores Income Dips

Net sales in the fiscal 2006 third quarter slipped to $85.2 million, compared with $91.8 million in the fiscal 2005 third quarter, while comparable store sales declined 5.6%. Stuart Rose, Rex's chairman and CEO, pointed out during a conference call with financial analysts Tuesday that the company's income from synthetic fuel limited partnership investments declined to $5.9 million compared with $8.4 million in the comparable year-ago period. That year-ago period also included a $1.2 million gain related to the sale by the company of its interest in a synthetic fuel limited partnership.

Rex recently filed documents with the SEC saying that it received confirmation that all of the synthetic fuel plants for which it receives income are in operation. In light of that information, the company expects to record higher levels of income from the sales of its synthetic fuel interests than previously indicated through Dec. 31, 2007, it said in the filing.

"We believe our ethanol interests represent ideal opportunities for Rex to extend our presence in the energy sector and further diversify our earnings mix," Rose said. The company has plans to participate in five proposed ethanol producing plants. Its existing or planned investments include $16 million in Patriot Renewable Fuels LLC in Illinois, $11.5 million for Levelland/Hockley County Ethanol LLC in Texas, $5 million in Big River Resources LLC in Iowa, $14 million in Millennium Ethanol LLC in South Dakota and $24.9 million for One Earth Energy LLC in Illinois.

During the fiscal 2006 third quarter, Rex sold seven of its retail stores for a total of $6.8 million and recorded a $2.2 million pre-tax gain related to the real estate sale. As of Oct. 31, the company operated 207 retail stores in 36 states. It traditionally concentrates its stores in markets with populations of 20,000 to 300,000, generally operating a low-overhead store format in free-standing as well as strip shopping centers and regional malls.