SCARBOROUGH, Maine -- Hannaford Bros. here said it will boost capital spending this year by 16% as it attempts to catch up on delayed projects in the Northeast.
The company said last week the inclusion of Easter in this year's first quarter, ended April 3, helped boost sales and other revenues 6.4% to $839.1 million, while net income increased 12.2% to $20 million. Comparable-store sales rose 2.7%; however, when estimated sales are adjusted for Easter, which fell in last year's second quarter, the company said comps were up 1.7%.
Hugh G. Farrington, president and chief executive officer, said the company is "continuing the pursuit of growth models, both internally -- including our home-shopping business in Boston -- and through possible acquisition."
According to its annual report, Hannaford will spend $165 million this year on four new stores, four expansions, eight major remodelings and numerous minor remodelings and store refurbishment projects, all of which will boost net square footage by 3.7%. Hannaford said it spent $143.4 million in 1998 to increase square footage by 4.5%, encompassing seven new stores -- three in the Northeast and four in the Southeast -- plus three relocations in the Southeast and an unspecified number of remodelings and expansions in the Northeast.
The report said most of Hannaford's capital spending this year will be directed to the Northeast, where the company has scheduled three store expansions, eight major remodelings and several minor remodelings. "As we invested in the Southeast over the past few years to create the mass necessary to become profitable in that market, we have postponed projects that must now be done," the report said.
Hannaford said it plans to open one new store in the Northeast (in York, Maine) and three new stores in the Southeast (in Apex and Charlotte, N.C., and Richmond, Va.), plus three store expansions in the Northeast (in Ossipee, N.H., and Jay and Bucksport, Maine) and one expansion in Richmond, Va.
As it remodels and expands existing Northeast stores, Hannaford said, it plans to reformat them based on the layout developed by the company as it built new stores in the Southeast.
According to the annual report, that prototype is laid out in two sections, with perishables on the right side, grocery and nonfood departments on the left. Perishables departments encompass produce, bakery, delicatessen, a meal center, European-style seafood, self-service meat and a butcher shop, gourmet coffee and cheeses of the world, all located in a large, airy, open area, with all product preparation done on the sales floor.
The annual report said Hannaford closed seven Southeast stores during 1998 "that we determined were in non-core markets for us and showed limited opportunity for profitable growth," including four stores in North Carolina, two in South Carolina and one in Virginia.
At the end of 1998 Hannaford operated 150 stores, including 104 in the Northeast (46 in Maine, 23 in New York, 21 in New Hampshire, eight in Vermont and six in Massachusetts) and 46 in the Southeast (27 in North Carolina, 18 in Virginia and one in South Carolina). The company also serves as a wholesaler for 19 independent stores in the Northeast.
Other matters discussed in the company's annual report included the following:
Hannaford said it expects to "catch the wave" as home delivery in the Greater Boston market accelerates in the next two to four years.
It is continuing to seek new ways to enhance sales through marketing to individual customer needs.
It is investing in extensive training and education to ensure proper food-handling procedures.
According to the annual report, the Boston marketing area "seems to be the hotbed for testing" of grocery home-delivery systems, with the potential to become a $700 million market. The company said sales of its Hannaford's HomeRuns are running at approximately $250,000 a week, or $13 million a year.
Hannaford predicted that the national market for home delivery could exceed $50 billion in the next two to four years, "and we believe our experimentation in Boston positions us well to catch that wave," the report said.
Hannaford began its HomeRuns program in 1996, "and it is still a small local business," the annual report noted. However, the company said it is a business Hannaford controls from start to finish since moving into a new 135,000-square-foot distribution facility in Somerville, Mass., last year.
That facility includes a new order-entry, item-picking and routing system -- "a software solution built from the ground up for our business instead of cobbling together packaged systems as we had in the past," the report noted.
Regarding the chain's new emphasis on marketing, the report explained that Hannaford has been shifting from a retailing to a marketing company over the past two years in order to better understand the individual needs and wants of its customers.
"Where once it was a successful strategy to understand and appeal to the growing mass market, the clarion call of the next decade may well be understanding individuals and finding the common ground on which to serve them," Farrington wrote in the report.
Hannaford said that in 1998 it enhanced its marketing department -- begun in 1997 -- by hiring people from various packaged-goods manufacturing companies "to focus our marketing thinking in a different way than we were used to as retailers, with more emphasis on strategic marketing discipline."
The company said the increased emphasis on marketing has resulted in an increase in spending on advertising and promotion and more research to develop a better understanding of current and potential customers and their true needs and wants.
"The approach in 1998 has not been to create a one-size-fits-all marketing approach but rather to 'focus like a laser beam' on individual marketing," the report explained.
The report said the marketing department sought to educate the whole company during 1998 to speak the language of marketing and to commit to the consumer "by starting to look at the business not only from the inside out but from the outside in."
The action plans that have evolved from that process "will be fielded in a variety of markets to test their sales-building potential," the report said.
To use information technology to spur marketing, the company said, it has developed an in-house Strategic Information Process, or SIP, that's been rolled out to all stores to enable them to focus on sales to customers rather than inventory coming into the stores.
"To make the leap into the next century, we need timely information that SIP will provide," the report said. "This information will be integrated throughout the company so that we can easily see how an action in one part of our operation affects all the other parts."
Regarding food safety, the annual report said Hannaford sharpened its focus in 1998 by educating all managers and associates, instituting new controls and verifying that all food-safety procedures are followed.
It said the chain began doing its own internal health inspections by requiring all store managers to pass the National Restaurant Association's ServSafe food-safety program. It also developed an educational CD-ROM program to teach the basics of food safety to all food handlers, requiring them to pass the course with 100% accuracy and to re-take the test with similar results annually.
