LONDON (FNS) -- Shaw's Super Markets, East Bridgewater, Mass., is launching a larger store format and will move into Connecticut and Vermont over the next two years, its parent J. Sainsbury here said.
Shaw's expansion plans were revealed as part of Sainsbury's financial results for the year ended March 11.
During the year, Shaw's had a 34% increase in operating profits to $62.3 million on a 5.3% rise in sales to $2.08 billion.
"Shaw's is now achieving major benefits from developments inspired by J. Sainsbury's expertise," said Rosemary Thorne, Sainsbury's finance director. "A restructured buying organization and development of own-label are now enabling Shaw's both to improve its price competitiveness and increase gross margin."
Operating costs at the chain declined as a percentage of sales because of improved logistics, systems and operating procedures, Thorne said.
The 87-store Shaw's did not open any stores last year but plans to add eight in the current financial year. It currently is building four stores in the Greater Hartford, Conn., area -- its first in that market, said Ian Coull, Sainsbury's property director. Shaw's also is introducing a store format that at 47,000 square feet is about 50% larger than its existing stores.
The larger format will enable Shaw's to expand into in-store pharmacies and enlarge its perishables, hard goods and flower departments as well as add in-store restaurants, Coull said.
The in-store pharmacies will benefit from the expertise Sainsbury's has gained from its link-up with Giant Food, Landover, Md., in which it acquired a 16.7% stake last year, Coull said. Giant contributed $10.6 million to Sainsbury's profits, Thorne said.
Sainsbury's hopes to aggressively expand Shaw's over the next few years, partially as a result of the U.K.'s tighter planning regimen that is severely restricting its domestic store-opening program. Coull said Sainsbury's would like to expand the Shaw's chain by about 10% a year over the next several years. This includes
opening stores in the New Haven, Conn., area and moving into the Vermont market in fiscal 1996-97 by opening three stores in the Burlington region.
However, the launch of the new store format at Shaw's and its opening program will impact the parent company's profitability in the current financial year, Thorne warned.
Overall, Sainsbury's reported a 281% increase in after-tax profits to $857.5 million (539.3 million pounds) on a 7.5% rise in sales to $19.2 billion. The sharp rise stemmed from the lack of exceptional costs last year, compared with charges of $587.1 million the previous year related to property writedowns.
Earnings per share rose 272% to 47 cents. Currency conversions were made at the rate of one British pound equals $1.59.
The sales improvement included a same-store sales increase of 1.1%, with inflation of 0.8%, the company said. However, the chain said it has been hit by the successful price promotion strategy of rival Tesco and the launch of that chain's loyalty card.
Sainsbury's said it plans to invest $68.4 million in Shaw's in the current year, but capital spending on new stores in the U.K. will fall by almost 60% to $348.2 million. Only 12 stores will be added in Britain in the current year. Sainsbury's plans to boost spending on remodeling existing stores by almost 80%, however.