BELLEVUE, Wash. -- Two remodeled Hughes Family Markets in southern California will be the first in the chain to reflect the influence of Quality Food Centers here, which acquired Hughes in March.
ughes philosophy of a warm and inviting decor while focusing the consumer on the perimeter departments."
The remodeled Hughes in Malibu will open Wednesday, and the replacement store in Irvine is set to open Nov. 12.
In other annual meeting highlights:
Shareholders approved a proposal to rename QFC's holding company Quality Foods Inc.
Kourkoumelis said Hughes, based in Irwindale, Calif., will attempt to raise its operating cash flow margins by focusing on perishables, expense reduction, improved buying, new-store growth and in-market acquisitions.
Mike Huse, chief operating officer of QFC's Pacific Northwest stores here, said QFC will attempt to boost sales of its proprietary brands from its current 8% level to something closer to the industry average of 15% to 20%.
Chris Sinclair, chairman of the holding company, said QFI will seek additional acquisitions of companies with sales of at least $250 million, though it will be flexible enough to adjust its growth strategies as opportunities arise.
In unrelated news last week, Hughes said it has named David M. Oliver senior vice president and chief financial officer. Oliver, 40, succeeds Al Brennan, who will retire after 30 years at Hughes.
Oliver, who was vice president and controller for Vons Cos., Arcadia, Calif., reports to Kourkoumelis.
Speaking at the annual meeting, Kourkoumelis said the consumer's image of Hughes in southern California is very close to that of QFC in the Pacific Northwest -- "in fact, much closer than we expected," he told shareholders,
Citing identical market research that asked consumers to rate Hughes on 35 different attributes, "the top three at Hughes were identical to QFC -- good produce, good customer service and good operating hours," Kourkoumelis said.
"Hughes is currently a very healthy business, although there is a profitability gap between Hughes and QFC," he added, noting that QFC's margin on operating cash flow (earnings before interest, taxes, depreciation and amortization) is 8.6%, compared with 4.8% at Hughes.
"Here is where we see significant potential to create value at Hughes," he said. Kourkoumelis said much of the profitability gap relates to lower development of key perishables categories, "and this will be a major area of focus."
He said QFC has already introduced its Premier Choice beef and "Chef to Go" programs at Hughes; the chain's produce departments have also added organic produce and now feature hand-stacking.
He said QFC hopes to drive additional sales through its proprietary brands program -- a three-tier private-label program that includes "signature" items in its premium line; "endorsed" brands that carry a "satisfaction guaranteed" seal of approval; and a "price fighter" line.
"Because our proprietary brands as a percentage of sales are approximately 8% -- still well below the industry average of 15% to 20% -- we believe there is a significant growth opportunity in terms of both sales and margins," Huse said.
