NORTHLAKE, Ill. -- Dominick's Supermarkets here said sales rose to record levels for the third quarter ended Aug. 9, driven by ongoing expansion of its Fresh Stores format.
The company said it plans to open four more Dominick's Fresh units this year and 12 more next year, and it expects to convert five additional stores to the Fresh format, raising the number of Fresh units from 33 to 54 -- just under half the store base -- by the end of 1998. In a phone conversation with securities analysts last week, Dominick's executives made these additional observations:
The company expects last week's merger of Smith's Food & Drug Centers, Salt Lake City, with Fred Meyer Inc., Portland, Ore., "will provide additional opportunities to further reduce our cost of goods."
It is seeking to convert additional locations in the urban Chicago area to Fresh Stores.
It does not expect an expansion by Meijer Inc., Grand Rapids, Mich., into northwest Indiana to have much effect on Dominick's existing or future operations there.
It is studying the Food 4 Less format in California to see if it can apply any of those principles to its Omni format in the Chicago area.
Robert A. Mariano, president and chief executive officer, told analysts that sales increases of 7.2% for the quarter and 5.2% for the year to date were driven by the growth of Fresh Stores, including five that opened in the third quarter and four that opened in last year's fourth quarter.
He said the company opened an additional Fresh unit last week in Wauconda, Ill., and plans four more through the balance of the year and 10 more in 1998, plus the five conversions. Mariano said Dominick's also plans to open two new Omni stores in 1998.
Of Dominick's 33 Fresh units, 19 are conversions, Mariano said. He told analysts conversions to the Fresh format usually increase a store's sales by 25%.
Two stores that Meijer plans to open next year when it moves into northwest Indiana will affect Dominick's only Indiana unit -- an Omni combination store in Schererville, Ind. -- "but we should be able to counter that impact with pricing," Mariano said.
In response to a question, Mariano said Meijer's expansion in Indiana will not affect Dominick's own expansion plans there. "Indiana continues to be a good area in which to expand our Fresh concept because it's contiguous with Chicago and the advertising overlap is substantial. So Meijer's moves there don't change any of our plans."
Those plans call for another Omni location next year -- in Hammond, Ind. -- and company executives told SN there could be additional Indiana stores in the future.
Mariano noted that Meijer is looking for sites in the Chicago area, "but we don't expect any of those to be completed in 1998," he said.
He also said he doubted an expansion by Eagle Food Centers, Milan, Ill., into the Chicago area would have much effect on Dominick's, "because our Fresh stores compete well vs. Eagle.
"In fact, the Dominick's Fresh stores perform well against all competition, and they put us in a good strategic position to protect and grow our market share."
3RD-QUARTER RESULTS
Qtr Ended 8/9/97 8/3/96
Sales $813.7 million $759.3 million
Change + 7.2%
Same-store + 1.0%
Net Income $5.6 million ($447,000)
Change + 5.2%
Inc/share 25 cents (3 cents)
40 Weeks 1997 1996
Sales $2.0 billion $1.9 billion
Same-store + 0.6%
Net Income $14.7 million ($2.1 million)
Inc/Share 66 cents (14 cents)
Includes preferred stock accretion of $2.2 million, or 14 cents per share, for the quarter, and $5.2 million, or 34 cents per share, for the 40 weeks.
