SALT LAKE CITY -- American Stores Co. here said capital investments and re-engineering efforts helped boost sales from continuing operations and earnings for the second quarter and 26 weeks ended July 29. Net income for the 13-week quarter rose 7.1% to $73.9 million and 9.3% for the half to $127.8 million. Total sales fell 3.7% for the quarter to $4.5 billion and 4.5% for the half to $8.9 billion. In American's Eastern food operations, sales rose 0.5% for the quarter and fell 0.4% for the half; in its Western food operations, sales rose 0.6% for the quarter and fell 0.5% for the half, and in the drug store division, sales rose 9.5% for the quarter and 9.2% for the half.
Same-store sales increased 1.6% for the quarter and 1.1% for the half. For the quarter, same-store sales rose in each of the company's three divisions -- 0.2% in the East, 0.3% in the West and 5.5% in the drug store division. However, for the half, same-store sales fell in the two food divisions -- 0.1% in the East and 0.9% in the West (excluding the effect of a nine-day labor dispute in the first quarter) -- and rose 5.7% in the drug store division. Victor L. Lund, chairman and chief executive officer, said the costs of the chain's re-engineering effort -- known internally as the Delta project -- amounted to approximately $5 million during the quarter, "[but those costs] continue to be offset with savings generated throughout the company." According to Lund, American spent $353.6 million on capital projects during the first half, and he reiterated the company's commitment to spend at least $700 million for the year. American operates 1,613 stores in 26 states. During the quarter, the company opened eight new stores, completed 21 major and 39 minor remodels and closed 11 stores. Capital expenditures for the quarter totalled $177.8 million. Lund said American plans to open approximately 68 new stores (not including 17 Clark Drugs stores acquired during the first quarter) and complete 73 major remodels and 100 minor remodels during the year. Gary Giblen, managing director of Smith Barney, New York, said the second-quarter same-store sales increase of 1.6% is the company's best gain in several years. "It's a result of American's ability to get a strong return on its increased capital spending," he said.