(Nov. 5) RICHMOND, Va. — Recent hurricanes blew earnings off course for Performance Food Group Co. in the third quarter.

But winds of a different kind — speculation that the Richmond-based foodservice distributor might unload its commodity-driven fresh-cut produce business — continue to howl around Performance.

Performance said Nov. 2 that earnings slipped 18%, to $17.8 million in the quarter that ended Oct. 2, from $21.6 million in the same period in 2003.

Partially to blame, said Kevin Collier, director of investor relations, were sales of bagged salads, which showed only modest gains.

“I think it’s important to understand the sales growth was only 4% this quarter because we were working un-der some fairly slow growth in retail packaged salad category, and that has been in the 3%-4% range recently,” Collier said.

Performance has given no indication that it intends to sell Salinas, Calif.-based Fresh Express Inc., its fresh-cut unit that has undergone changes in management in recent months.

But there has been speculation of late that the company might listen to offers for Fresh Express.

“If you kind of listen to the tone of the conference call (Nov. 2), it certainly seemed that they’re more serious about it at this point going forward,” said Eric Larson, senior research analyst with Piper Jaffray Cos., Minneapo-lis.

Fresh-cut produce is a good business with great potential, for a company that has patience, Larson noted.

“I think they still believe that it’s a very good business and that it’s got bright prospects. It’s just that it may be more valuable in the hands of somebody else,” Larson said. “And I think it’s the commodity, the volatility and relatively unpredictability of what that earnings stream will be.”

The unpredictability of a commodity-driven business might not fit with a company that is looking for more predictable growth on its ledger, Larson noted.

“It’s a good growth business. It’s definitely a direction where consumers are going in terms of their consump-tion trends,” he said.

Larson said that he was not sure if relatively flat packaged-salad sales would contribute to any decision by Per-formance to unload its fresh-cut business.

Gains in the still-underdeveloped fresh-cut fruit category could help to mitigate any disappointment in salad sales, Larson added.

“If you evaluate the opportunity that you have in the fresh-cut fruit arena, I would suspect that they would say, ‘Well, gosh, you know, we might hold onto the fresh-produce business.’ You have a $15 billion or $16 billion fresh-fruit business that’s basically untapped relative to the convenience that’s been added to that business.”

Collier also noted the company has been de-emphasizing some of its commodity-based business. He said the company expects better financial results in the future.

Performance’s total sales rose 11.5%, to $1.55 billion for the period.

Shares of Performance Food were rebounding after a months-long decline. Shares closed up $1.56, at $24.61, on the Nasdaq stock market Nov. 2.

The company’s stock had fallen about 41% from its 52-week high of $40.06 reached in December 2003. The stock hit bottom for the year Sept. 8, at $20.99.

“We are pleased with our solid internal sales growth of 11.5% in the quarter despite the recent hurricane-related challenges in the Southeast markets,” Bob Sledd, chairman and chief executive officer, said in a news release.

He noted that it was the 39th straight quarter in which the company had reported sales increases over previous-year results.

Fresh Express, which Performance purchased in 2001 for about $290 million, is one of the top-selling bagged salad brands, and Performance’s fresh-cut division racked up an industry-best $933 million in sales in 2003.

In addition to operating a fresh-cut segment, Performance markets and distributes more than 64,000 national and private-label food and food-related products to about 48,000 foodservice institutions.

In July 2003, Performance consolidated fresh-cut operations under Fresh Express, a division that has three sub-sidiaries: Fresh Advantage, Redi-Cut Foods and Fresh Express.

Performance recently replaced Tom Lovelace, who resigned as chief executive officer at Fresh Express during the summer, with Mark Drever, longtime president and chief operating officer.