CARR GOTTSTEIN TAPS HAYWARD AS PRESIDENT, CHIEF EXECUTIVE

ELLIOT ZWIEBACH

ANCHORAGE, Alaska -- Lawrence H. Hayward was named president and chief executive officer of Carr Gottstein Foods here last week and said his main goals will be to accelerate growth and slice debt.

Hayward, 41, succeeded Mark R. Williams, 47, the president and CEO for the past two years. Williams remains on the company's board of directors with the new title of vice chairman, although he said he plans to move on to other, personal projects. Hayward had been senior vice president and chief operating officer since joining the 39-store chain in March 1995 from Buttrey Food & Drug Stores, Great Falls, Mont., where he was vice president of store operations.

Hayward will set out to boost results in a regional economy that isn't experiencing rapid growth, observers noted. Hayward said he will expand the company's conventional store format and food-service operations. In other developments last week:

Carr Gottstein reported record sales and a net loss for the second quarter and first half ended June 30.

The company entered into a new three-year agreement for about 1,500 retail clerks and meatcutters represented by the United Food and Commercial Workers Union here. Asked why he was exiting day-to-day operations at a relatively young age, Williams told SN he had worked his way up from dairy clerk to president over 20 years, "and although I remain committed to this company and will work on projects two or three months a year, there are a list of things I want to do with the second half of my life."

Among them, he said, is spending more time with his family in Seattle and playing golf. "I've always had a passion for golf," he said. "I'm good with the sticks, and I want to see if I can make it on the pro tour." He added that he may also do some work for other companies "because I recognize that 47 is too young to stop thinking of working altogether." Regarding Carr Gottstein's growth plans, Hayward told SN his main goals will be to grow the business and reduce debt, achieving the latter by bolstering sales and earnings. Some increased sales are expected to come from Eagle Quality Centers, a conventional-store format Carr Gottstein has developed for smaller communities. It operates eight Eagles, most of which were acquired from independent operators in various small Alaskan communities. "With our full-line wholesale operation, we've found that smaller locations enable us to apply our warehouse synergies and market expertise to increase sales in the double-digit range," Hayward said. Some of the Eagles do $300,000 a week, "which would be fairly good stores in the Lower 48 [states]," Hayward said, "and we've been very encouraged by the financial performance of the last two or three Eagles we've opened, which are at or approaching $1 million a week." He said the company also sees opportunities to expand its larger-format Carrs Quality Centers stores. However, Carrs units may require an investment of $10 million or more, while the Eagles require much less capital, "which fits in with our deceleration of capital spending," Hayward noted. Yukon Express Services, Carr Gottstein's two-year-old institutional food-service division, is another growth avenue, Hayward said. "We continue to see opportunities on that front because food service fits well with our core business, and we're getting substantial sales gains in that area."

The recently completed Fusion re-engineering program is providing Carr Gottstein with better, quicker and more accurate financial reporting, Hayward said, adding that installation of an OMI buying system also is providing more precise data. Hayward begins his term as president "in a very frustrating situation. Alaska is not an exuberant growth area, and the company has already modernized and upgraded its store base," one securities analyst told SN.

"Leonard Green & Partners [the New York-based investment firm that owns majority control of Carr Gottstein] wants to get its equity out. But it reportedly failed to sell the company, and it's been unable to diversify through an acquisition in the Lower 48. So it did a self tender last year," the analyst said. "The self tender created temporary value for existing shareholders but added debt to the company's balance sheet that now requires Carr Gottstein to utilize cash flow to pay down debt, which makes it a tough row to hoe." Carr Gottstein's sales rose 4.1% to $161 million from $154.6 million in the 13-week second quarter and 3.4% to $303.8 million from $293.7 million in the half. Same-store sales rose 2.8% in the quarter and 0.5% in the half at Carrs; at Eagle, they fell 0.1% in the quarter but were up 1.5% in the half. The company reported a $415,000 net loss in the quarter vs. net income of $2.7 million a year ago and a $2 million net loss in the half vs. net earnings of $3.9 million in the prior-year period. The net income drop, the company said, reflects hikes in interest costs related to the self tender completed in November, depreciation and amortization increases, some expenses from corporate re-engineering and softer gross margins from the kick-off of an electronic marketing program. Carr Gottstein's capital investment program continued as planned in the second quarter, with total capital spending through the first six months of $2.7 million. The company said it expects capital spending levels in the second half not to exceed first-half levels.