MOBILE, Ala. -- More companies are vying for the same food dollar in this region, so Delchamps intends to focus on "an aggressive pursuit of market share, margin improvement and cost management," according to Randy Delchamps, chairman, president and chief executive officer.
The chain plans to achieve those goals by adding more stores with more high-margin specialty departments and a larger assortment of private-label products and by paying closer attention to costs, Delchamps said.
The comments were made at the company's annual meeting here recently. According to Delchamps, the recent acquisition of seven stores in Alabama and Mississippi from Kroger Co., Cincinnati, was part of the chain's effort to improve market share. As reported earlier, Delchamps obtained the stores in exchange for $4 million in cash, two Delchamps stores and inventory at cost.
He said additional market presence represented by the acquisition is a key to remaining a strong competitor in its marketing area, which has seen 119 stores opened or about to open during fiscal 1994 and 1995. Delchamps' competitors include Albertson's, Bruno's, Publix and Winn-Dixie among grocery operators and Wal-Mart and Kmart among supercenter operators. Steve Hofheinz, an analyst with Sterne Agree & Leach, Atlanta, said that Delchamps' focus on cost-control is a good strategy in this competitive market because it will improve margins and enable the firm to stay competitive on price. Moreover, he said, Delchamps' expansion plans make good sense for the company, although not for the industry as a whole because it adds to an overstored situation. By the end of fiscal 1995 Delchamps estimated that competition would add a total of 2.6 million square feet of selling space, "or about one-half the total gross square footage in the Delchamps chain being opened right at our front door in a short period." The 119 new stores include 98 supermarkets and 21 supercenters, he said, noting that the 60,000 to 70,000 square feet of space the supercenters devote to food is more than the sales area at Delchamps' largest, 58,000-square-foot store. Given the high number of new competitive entries, Delchamps sees the company's 1.2% increase in same-store sales as "encouraging." Sales per customer are also increasing as Delchamps expands its offerings, he noted, "and sales in stores that have been remodeled within the past two years increased an average of 21%, which is a confirmation that our expansion and remodeling program is beginning to pay off. "The enlargement and upgrading of stores enables us to have higher-margin specialty departments and an overall larger offering, including more of our own higher-margin brands. "We are continuously adding new Delchamps brand products and, as a result, we expect better earnings to follow as margins and sales per customer increase." To keep up with the rate of inflation and to increase earnings, Delchamps said the company plans to focus "primarily on better buying and more volume to relieve the pressure on margins, and we're already on that track." In addition, Delchamps said the chain is "taking an extremely hard look at all of our operations, and we continue to cut costs across the board to serve customers as efficiently as possible."