Food Processor WSMP Winning Over Investors

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By Louise Kramer
Staff Reporter

A little North Carolina food processing company with a forgettable name but a lot of savvy is trying to grab both a piece of the wide-open market for prepared food in supermarkets and investors' attention.

This week,

WSMP

(WSMP)

got the latter. Though average daily volume is a mere 4,300 shares, Wednesday it popped to 32,700. The stock, which has been making a steady climb from its 52-week low of 4 1/2 to an April 7 high of 10 3/8, closed down 1/2 at 9 3/4 on Thursday on volume of 1,500 shares.

Based in Claremont, N.C., pop. 850, WSMP is going after business that supermarkets themselves have been struggling for years to tap into. It's the same home-meal replacement niche

Boston Chicken

(BOST)

is after with its new supermarket venture, and

Brinker International

(EAT) - Get Report

is after with

Eatzi's

. But rather than cater to the plum upscale customer with no time to cook, WSMP, which stands for

Western Steer-Mom 'n' Pops Inc.

, is targeting the blue-collar crowd with a new line of prepackaged, refrigerated meals that cost under $4.

So what accounted for this week's activity? Selman Akyol of

Pauli & Co.

, the sole analyst who actively tracks WSMP -- he initiated coverage with a buy rating in December, when the stock was at 8 -- says there was no particular news to spark Wednesday's pop. (Pauli & Co. has not done recent underwriting for WSMP.) But there was certainly some schmooze.

Wednesday, WSMP execs visited the Big Apple to buy lunch for investors at the

"21" Club

, where the price tag was surely more than $4 per meal. Thursday, WSMP President and COO David Clark and Vice Chairman and CEO Jimmy Richardson touted their company at the annual restaurant conference of

Lipton Financial Services

.

One potential investor at Lipton's event, Kevin Koons, who trades his own money, says he'll look into buying WSMP and notes that he likes the management. "They're hard-working people who are staying up with technology and change," he says. Management owns 41.5% of the stock in the company, which began as a restaurant operator and went public in 1970 at $1 per share. In addition to its new home-meal replacement division, WSMP operates 86 family restaurants, a ham curing business and a sandwich production plant that cranks out 3 million sandwiches a week for various vendors.

The company reported annual earnings last week of 36 cents per share, 2 cents above Akyol's estimate. Akyol projects earnings of 51 cents per share this year and 71 cents the year after. WSMP had operating revenue of $87.7 million for the year compared with $79.4 million the year before. Net income was $1.1 million compared with a net loss of $1.5 million last year.

WSMP's biggest supermarket client right now is

Food Lion

(FDLNA)

, currently famous for winning a judgment against

ABC News

stemming from a muckraking segment about the chain's deli and meat departments broadcast on "Prime Time Live." A 40-store test of WSMP's products is slated for expansion into 1,000 Food Lions by July, WSMP says. Still, the deal seems less than airtight. There's no contract, though the companies do have a 20-year relationship, Richardson notes.

WSMP says it has a dozen more chains lined up for its 15-item line, which includes chicken breast and meat loaf and individually packaged side dishes and desserts. Also on tap are breakfast sandwiches under the

Hardee's

label that would be sold in supermarkets, just like

White Castle

sells burgers in supermarket freezers. Hardee's is the ailing North Carolina fast-food chain -- well-known for its breakfast biscuits -- that is being gobbled up by

CKE Restaurants

(CKR)

. WSMP officials say CKE's deal, announced Monday, shouldn't affect its plans. The company is also working on a test project to bake biscuits for Hardee's to use in its restaurants. Hardee's officials could not be reached for comment late Thursday.

COO Clark says WSMP has an edge over other food processors because it has invested in extensive food-safety measures at its plant. Also, WSMP has found good packaging, a critical link for food sold in supermarket delis.