STAMFORD, Conn. -- What drew Quality Food Inc. here to acquire Hughes Family Markets and Keith Uddenberg Inc.? At Hughes, Irwindale, Calif., it was the growth potential, at Keith Uddenberg, the prime real estate, Chris Sinclair, chairman of QFC's holding company told SN.
was looking for, Sinclair said. "Hughes has a good trademark, with stores in great locations and a reputation for offering high-quality products and customer service," Sinclair said.
There was also the opportunity available to boost sales and earnings at Hughes, which had been operating in a slow-growth mode since 1993, when it deliberately cut back on aggressive store expansion to concentrate on the distribution center it opened that year, Sinclair said. "So it's only in the last 18 months that Hughes has resumed a new-store construction program," Sinclair said. Hughes has opened five new stores during that period, he noted, including a unit in Mission Viejo, Calif., that opened in mid-April.
"But we expect to be more aggressive on new sites, with at least three or four new stores a year, conservatively speaking," Sinclair said.
Dan Kourkoumelis, QFC's president and chief executive officer, is leaving those positions to become president and CEO of Hughes. Roger Hughes, son of the founder of Hughes, remains as chairman of the QFI subsidiary. Sinclair said Hughes has made a commitment to remain with the company "to make the transition work and to be supportive of what we're trying to do."
However, Fred McLaren, who served as Hughes' president for 23 years, resigned a week before the acquisition was completed, and despite industry speculation to the contrary, "we didn't play any role in his decision to retire," Sinclair told SN.
"Fred was getting to the point that he'd been considering retirement anyway, and we assume he felt the acquisition was the appropriate time to do that."
While QFC's goal outside its home base in the Pacific Northwest is to acquire strong upscale operators, the goal closer to home has been to acquire companies in contiguous areas, regardless of format, Sinclair said.
QFI was interested in acquiring the 25 Stock Market stores from Keith Uddenberg, Gig Harbor, Wash., "because they'd built up a nice business, with some great real estate locations in areas that were contiguous to QFC's, but not competing with us -- so it broadened our geographical coverage," he explained.
"But it was the great real estate, as much as anything, that made us interested." Since completing its acquisition in February, QFC said it will convert 13 of the 25 stores to the QFC banner this year.
One unit in an outlying area has been sold, and five others will retain the Stock Market name and price-impact format developed by the company's original owner "for the time being because they don't operate in trade areas or at sales levels that fit our requirements," Sinclair said. "We feel all 25 could be converted to the QFC banner, but we think the returns will be better under the Stock Market name -- though that's a decision we will reassess over the next 12 months."