WAYNE, N.J. -- Grand Union Co. here said last week it expects to increase square footage by 600,000 square feet, or 10%, over the next 12 months.
J. Wayne Harris, chairman and chief executive officer, said the company plans to open 16 to 18 new stores and complete 20 remodelings during that period, at a cost of $100 million, most of which will be financed from internal cash flow.
Grand Union said it has signed a new multiyear contract with C&S Wholesale Grocers, Brattleboro, Vt., that is designed to drive cost savings and internal efficiencies as the chain's sales base grows.
Grand Union said sales fell and operating cash flow rose for the second quarter and 28 weeks ended Oct. 16.
Speaking to securities analysts in a conference call last week, Harris said Grand Union's capital-development program "is in full motion," with the chain's first prototype unit -- a 55,000-square-foot store in Toms River, N.J. -- scheduled to open in January, followed by a 52,000-square-foot store in Carlstadt, N.J., in February and two or three additional new stores in March.
Of the 20 units set for remodeling in the next 12 months, six are scheduled for completion in December, five in January, one in February and two in March, Harris said, "and a year from now we will have completed remodels or upgrades on nearly a third of our existing store base."
"Over the last several quarters, we have focused on a strategy of protecting our existing sales base, building gross margin through improved product mix, controlling expenses and increasing operating cash flow. We now believe the company is well-positioned to benefit from the new stores, remodels and new technology that will be rolling out at a regular pace over the next few years."
He said Grand Union has opened three new stores, expanded two and completed seven remodelings in calendar 1999, at a cost of $30.7 million, which was funded from internal cash flow.
He said the opening Nov. 3 of a 52,000-square-foot Grand Union store in Plainview, N.Y., that the company acquired and remodeled, produced the strongest opening-week's sales in the company's history.
He also said the chain was "very encouraged by the performance" of its first fresh market, a 35,000-square-foot store called GU Fresh Market, that opened Oct. 6 in Danbury, Conn. A second fresh store, in Garden City, N.Y., opened last week, and a third is scheduled to open early next year in Southbury, Conn., Harris said.
Gary M. Philbin, president and chief merchandising officer, told the conference call Grand Union negotiated the new supply agreement with C&S "to become more efficient in store labor, drive more efficiencies in warehousing and distribution and share in the benefits of our growth.
"When we negotiated the old contract we were a different company, and we wanted to take advantage of our new growth opportunities," he said.
C&S has been Grand Union's primary supplier since 1995; the retailer's former contract with the wholesaler was due to run through 2005.
Harris said he was reluctant to disclose details of the new contract "because some things we negotiated are unique and will be beneficial to the company."
Turning to Grand Union's financial results, the company said sales fell 1.4% to $512.3 million for the 12-week second quarter and 1% to $1.19 billion for the half, reflecting the closing of five underperforming stores and disruptions from ongoing remodeling at existing stores.
Comparable-store sales fell 0.4% for the quarter and 0.3% for the half, adjusted for the prior year's Easter week, while comps in the chain's New Jersey, New York and Connecticut stores were positive for the ninth consecutive quarter, the company noted. Jeffrey P. Freimark, executive vice president and chief financial officer, told analysts companywide comps would have been positive if Grand Union had not shifted its annual Grand Can sale to the beginning of the third quarter to coincide with the first of the month, in contrast with last year, when the promotion was held in mid-month.
He said the third quarter "is off to a strong start, and we expect comps to rise 1% to 2% during the quarter."
The company said operating cash flow increased 13.6% for the quarter to $31 million and 14.7% for the half to $67 million.
Grand Union said it had a net loss of $26.6 million for the quarter -- after the effect of amortization of $30.4 million in goodwill value following last year's reorganization -- compared with net income of $233.1 million a year ago that included an extraordinary post-reorganization credit of $260.8 million.
For the half the net loss was $64.4 million, including the effect of amortization of $71 million in goodwill value, compared with net income of $172.5 million a year ago, which included a $259 million post-reorganization credit.