The Curdling Of Dairy Mart

It may not have been a sure thing, but it looked promising enough. At least that's what executives in Dairy Mart Convenience Stores Inc. believed when they joined a management buyout led by then-President Frank Colaccino in 1992. The nation's third-largest convenience-store chain, after 7-Eleven Stores and Circle K, Dairy Mart looked healthy. There was even talk that it would someday top $1 billion in sales. That proved a powerful lure. Philip Morris Cos. invested $8 million in the deal, and the state of Connecticut lent Dairy Mart $7 million.

Two years later, the Dairy Mart buyout has curdled. After a profit of $4.8 million in 1992, the Enfield (Conn.)-based company lost $6.8 million in 1993. It earned a meager $866,000 in fiscal 1994, which ended Jan. 31, as sales fell 1.8%, to $761 million. Worse yet: Its stock has tumbled 60% since January, to 3.