BUENA PARK, Calif. -- Lucky Stores here has developed a new prototype that combines its supermarket format with Sav-On Drugs under one roof.
rs at the front of the store for greater convenience.
Lucky and Sav-On are owned by American Stores Co., Salt Lake City. The company said it has opened nine combination stores in southern California -- all at former locations of Smith's Food & Drug Centers that it acquired earlier this year. It added that it is building five combos in northern California. American Stores officials declined to discuss details of the new format.
Securities analysts said the prototype was developed when Lucky acquired 10 stores from Salt Lake City-based Smith's. Those units are 62,000 to 80,000 square feet vs. Lucky's 60,000-square-foot stores.
Coincidentally, Lucky last year had developed a new prototype with a supermarket adjacent to a Sav-On drug store, analysts told SN. With more space to fill under one roof at the former Smith's units, Lucky decided to combine the two operations under one roof, and that now has become its long-term prototype, analysts said.
However, the combos Lucky builds, including the ones in northern California, will be about 64,000 square feet, the company said.
According to Andrew Wolf, vice president at Merrill Lynch, New York, "It's easy to see the cost savings from operating the two stores under one roof. For example, you have a smaller stockkeeping unit count than you would in two stores, and you can eliminate a lot of overlap. And there's a potential to save on labor expenses as well."
Jonathan Ziegler, an analyst at the San Francisco office of Salomon Bros., New York, said American Stores is on the right track with the Lucky/Sav-Ons in southern California and its Jewel/Osco units in Chicago -- combination food and drug stores plus freestanding drug stores -- because of third-party prescription plans. "Those plans seek out user convenience, and they want to make sure consumers can get prescriptions filled quickly and conveniently," Ziegler explained.
"If you have a density of locations in a market -- which you can't do with combo stores but you can with combos and freestanding drug stores -- then you're in a better negotiating position with third-party programs."