SHAW'S BEGINS STAR CONVERSION

MARTIN SCHNEIDER / Additional reporting by James Fallon in London

EAST BRIDGEWATER, Mass. -- Shaw's Supermarkets here, a subsidiary of J. Sainsbury, London, said it has begun converting the 44 Star Market units it acquired in 1998 to the Shaw's banner.

Shaw's said it completed the conversions of seven units north of Boston late last month and will continue converting the remaining 37 stores at a steady pace, according to Bernard Rogan, Shaw's spokesman.

"We have been pretty energetic about the conversion. The stores will be altered in various degrees. It's more than just changing signs," Rogan told SN.

Rogan explained that the stores have fully integrated the Shaw's private-label items and have also had their technology updated to Shaw's system.

"Some stores were very drastically changed. One store was gutted and a brand new Shaw's was built inside the Star shell," Rogan said.

According to Rogan, sales at the stores were brisk and above Shaw's projections. Although Star had many loyal customers, he said Shaw's believes customers for the most part prefer the new format.

"Some customers considered the change long overdue," Rogan said.

Rogan did not specify how quickly the remaining Star units would be converted, but added he hoped they can be done en masse like the reopenings on May 25.

"It makes a lot of sense from a marketing standpoint to do a group of stores at one time, but I really cannot predict how we will move forward," Rogan said.

Meanwhile, Shaw's Supermarkets continues to outperform its parent.

Shaw's last week reported a 32.6% rise in operating profits to $171 million on a 5.1% increase in sales to $4.06 billion for the year ending March 31.

The results at Shaw's were significantly better than those posted by its parent company. Sainsbury's reported a 30.4% drop in profits after taxes and exceptional items to $377.7 million on a 5.9% increase in sales to $26.19 billion last year.

Last year's results were hit by exceptional charges of $96.6 million to cover the costs of restructuring at the group.

The improvement at Shaw's stemmed from strong growth in its same-store sales as well as increased benefits from its acquisition of Star Market. Shaw's said it achieved cost synergies of $21 million last year from the integration of the two companies.

Sainsbury's continues to focus Shaw's on fresh foods, customer service and strong promotions. It launched a loyalty card scheme in October 2000 which now has 3 million members. Shaw's continued to improve its fresh food offering during the year and also increased the number of in-store pharmacies and extended its healthy and beauty offering. In addition, it rolled out Star Market's Wild Harvest and La Carte offers to selected Shaw's stores during the year.