VONS PLACES FOCUS ON PRODUCTIVITY

ELLIOT ZWIEBACH

ARCADIA, Calif. -- By concentrating on productivity improvements, Vons Cos. here is making "great progress" in its efforts to reverse negative trends of prior years, Larry Del Santo, chairman and chief executive officer, told shareholders at the company's annual meeting here. Del Santo was named chairman immediately after the meeting, following the retirement of Roger E. Stangeland. Stangeland was named chairman emeritus of the company. He will remain a board member and become a consultant to Vons.

According to Del Santo, improvements are apparent on several fronts, including the following:

Same-store sales have continued to improve for five quarters, including a return to positive comparisons in the fourth quarter of 1994. In addition, the 1.6% increase in same-store sales during the first quarter of 1995 was Vons' best performance since 1991.

Sales per selling square-foot have improved significantly, which Del Santo said "tells us we are making our investments more productive" through the closure of stores and other facilities that

were either losing money or deemed unnecessary to Vons' long-term strategy.

Staff reductions, outsourcings and increased efficiencies have reduced Vons' administrative expenses.

The shutdown of its Expo warehouse stores will enable the company "to better direct our resources to make Vons and Pavilions more productive," he said.

After Vons flattened its organization, "the distance from this office to our stores is a lot closer today than it's been in the past, and we are more responsive to our customers and our associates," Del Santo said. To improve store-level results, Vons has introduced a program called "Fresh at 5," designed to make sure stores are fully stocked during evening hours and weekends, Del Santo said. "This new program, the result of consumer research, has caused us to change employee schedules to ensure that our stores are at their best when most of our customers shop," he explained. Del Santo said Vons has no plans to expand beyond Southern California and Las Vegas for the foreseeable future. "We've studied this a great deal, and we see adequate opportunities over the next several years to backfill in those areas using our distribution and supervisorial systems to maximize the return on our investments." According to Del Santo, the value image developed by the chain's advertising should help differentiate those stores from warehouse stores and supercenters that rely solely on price to attract shoppers. "But integral to the economics of this business are labor costs," he said. "We are a service business, and the majority of our costs are wrapped up in labor. "We compete with people with a competitive advantage in labor -- either because they're non-union or because they have special contracts -- so we go to the checkstand with a basic disadvantage, and we have to narrow that gap. "We can make up some of that difference with efficiency but not all of it." At the end of his formal remarks Del Santo spoke of Stangeland's contributions to Vons during his 10 years as chairman, saying, "His insightful knowledge of retailing, his vision for the company and his boundless energy have all been to the benefit of Vons." Earlier in the meeting Stangeland said he will remain active as a Vons director and as a consultant. He said he is investing in an upscale drug store venture called Quality Drugs, which expects to open its first store in mid-June in Newport Beach, Calif.