PORTLAND, Ore. -- One of the retail food industry's largest megamergers wrapped up last week when Fred Meyer Inc., based here, completed its acquisitions of Quality Food Centers, Bellevue, Wash., and Ralphs Grocery Co., Compton, Calif.
which were bolstered by a previous acquisition -- that of Smith's Food & Drug Centers (parent company of Smith's, Smitty's and Price-Rite stores in the Southwest) -- which took place last September.
Officials said net sales for the 12-week fourth quarter ended Jan. 31 rose 87.8% to $1.9 billion, from $1.0 billion in the year-ago quarter. Excluding Smith's, sales increased 13.3%. Comparable-store sales (excluding Smith's) increased 7.9% for 1997's fourth quarter, with comparable food sales increasing 7.9% and comparable nonfood sales increasing 8.0%. Fourth-quarter net income was $52.6 million, or 56 cents per share, an increase of 90.6% compared with $27.6 million, or 52 cents per share, a year ago.
For the 1997 fiscal year, net sales rose 47.2% to $5.5 billion from $3.7 billion reported last year. Smith's sales accounted for $1.3 billion of the increase. Comparable-store sales (excluding Smith's) increased 7.4%, with comparable food sales increasing 6.6% and comparable nonfood sales increasing 8.6%. Fiscal-year results were affected by an extraordinary charge of $91.2 million, after tax, for early extinguishment of debt, which was recorded during the third quarter. The charge covered premiums paid and the write-off of financing costs related to debt refinanced in the Smith's deal.
Income before the extraordinary charge was $103.3 million, or $1.46 per share, up 76.5% from the prior year's $58.5 million, or $1.05 per share. Including the extraordinary charge, the company reported net income of $12.1 million, or 17 cents per share.
The company said the common stock of the combined entity, Fred Meyer Inc., began trading last week and continues to be listed on the New York Stock Exchange under the symbol FMY. Under terms of the QFC merger, QFC shareholders received 41.2 million shares of Fred Meyer common stock, representing 1.9 shares of Fred Meyer stock for each share of QFC stock. Under terms of the Ralphs merger, all the equity interests in Ralphs were exchanged for 21.7 million shares of Fred Meyer stock.
Robert G. Miller, president and chief executive officer of Fred Meyer Inc., said, "Now that the mergers are completed, we can move forward quickly to realize synergies from these high-quality supermarket chains.
"We have already begun the process of understanding each other's business approaches and requirements, and we are all in agreement that this merger brings additional strength to each of our different businesses."
QFC operates 89 upscale supermarkets in the Seattle/Puget Sound region of Washington state and 56 Hughes Family Market stores in southern California. Over time, the Hughes stores will be converted to Ralphs stores, said Fred Meyer officials.
Ralphs operates 264 conventional Ralphs supermarket stores and 80 warehouse-format Food 4 Less stores in southern California, plus 65 conventional and warehouse-format stores under the names Cala, Bell and FoodsCo. in northern California. Ralphs also operates Falley's stores in the Midwest.
As reported, the new Fred Meyer entity will have more than 800 stores and generate annual sales of about $15 billion, making it one of the 10 largest U.S. food retailers and wholesalers based on sales volume.