PORTLAND, Ore. -- After "nothing less than a landmark year" in which it merged with three other companies, Fred Meyer, Inc., said in its annual report it expects to save "at least $150 million annually" by the end of the year 2000 as a result of its consolidation moves.
The consolidations involved Ralphs Grocery Co., Compton, Calif.; Quality Food Centers, Bellevue, Wash., and Hughes Family Markets, Irwindale, Calif. (which was owned by QFC), which merged with Fred Meyer, Inc., in April. The company also completed a merger with Smith's Food & Drug Centers, Salt Lake City, in late 1997, which included the Smitty's chain in Phoenix.
The company released its first post-merger financial numbers last week -- results for the 16-week first quarter ended May 23, which included sales and earnings for Fred Meyer Stores, Smith's and QFC for the full quarter and results for Ralphs from March 10, while first-quarter results for the prior year included only Fred Meyer Stores and QFC.
The company said overall sales for the quarter rose 153.6% to $4 billion and same-store sales (excluding Smith's and Ralphs) were up 5.6%. It also said merger-related charges resulted in a loss of $312 million for the quarter, while operating cash flow rose to $314.9 million, or 7.8% of sales, compared with $104.5 million, or 6.6% of sales, a year ago. Sales at Fred Meyer Stores rose 10.8% to $1.3 billion, with comparable sales up 6.2% overall, including a 7.1% increase in same-store food sales and a 4.9% increase in same-store nonfood sales.
Sales at QFC (including Hughes) rose 55.3% to $621 million -- partly reflecting two QFC acquisitions during last year's first quarter -- while same-store sales were up 2.6%. Quarterly sales were $951 million at Smith's and $1.15 billion at Ralphs.
Miller said comparable store sales continued to be very strong at Fred Meyer Stores and QFC, "(though) sales at Ralphs and Smith's were below plan for the first quarter."
The company said it recorded a charge of $209 million in the quarter for merger-related costs and merger integration costs; it said additional merger integration charges will be recorded in future quarters as expenditures are incurred.
The company also said it recorded an extraordinary charge of $216 million, net of taxes, for early extinguishment of debt, relating to premiums paid and deferred financing fees written off for Ralphs and QFC bonds that were purchased in tender offers on March 11. Excluding the special charges, the company said net income would have risen 84% to $41.4 million.
According to the annual report, the $150 million in anticipated savings will come in a variety of ways. "With $15 billion in combined buying power, each chain will be able to merchandise more effectively.
"With modern manufacturing and distribution facilities in five states, we'll get products into our stores faster.
"And by sharing Fred Meyer's and Ralphs' new technology platforms, all our companies will be able to operate, communicate and administer their operations more efficiently." The report said the company anticipates utilizing the individual strengths of each retail chain to benefit the others.
For example, it said Smith's distribution center in Layton, Utah, will supply Fred Meyer stores in Utah and southern Idaho with groceries, frozen foods and health and beauty aids, while the Smith's creamery in Layton will supply dairy products to Fred Meyer.
Later this year the company said the Fred Meyer distribution center in Puyallup, Wash., will begin supplying QFC stores.