DELCHAMPS CHAIRMAN ASSURES HOLDERS COMPETITIVE PATH WILL RESTORE PROFITS

PETER J. ZURALES Additional reporting: LISA A. TIBBITTS

MOBILE, Ala. -- David W. Morrow, chairman and chief executive officer of Delchamps here, assured stockholders at the annual meeting last week that the company would return to profitability this year by making itself more competitive in the grocery business.

In the wake of a $25.7 million loss in fiscal 1995 -- the first in the 118-store chain's history -- Morrow said Delchamps is upgrading existing stores, has doubled the number of field specialists and is spending $8 million to improve technology for check reading, security and work schedules.

In fiscal 1996, the company plans to renovate 40 stores that are at least 10 years old and to nearly double the size of its Theodore, Ala., store to 49,259 square feet. In addition, Delchamps plans to open new stores in Pensacola, Fla., and Robertsdale, Ala.

Morrow -- who took over the reins at Delchamps in April after Randy Delchamps resigned as president, chairman and CEO -- said the company's immediate goal was to "level the playing field with the competition" by buying and selling as efficiently as possible.

"Our goal is to drive sales upward," he said, adding that he expected the company to show a modest profit for the year.

In assessing "what went wrong" at the company, Morrow said Delchamps has failed to keep up with its competition. That competition has come not only from other grocery chains, he said, but from an increasing number of convenience stores, gas station marts, drug store chains and supercenters such as

Wal-Mart.

"We did not improve and change fast enough to keep up with the competition, much less stay ahead," he said.

Morrow noted that, as expected, the company posted a loss in the first quarter (see related story, Page 9), but said he was encouraged because weekly store sales were up and operating costs were down.

In other business, shareholders voted to add Richard LaTrace, president, and Tim Kullman, senior vice president, to the company's board of directors and re-elected James M. Cain and William W. Crawford to the board. The meeting came on the heels of two recent lawsuits filed against the company by present and former employees.

Oct. 19, Heidi Finchem, a 13-year Delchamps veteran who most recently was vice president of public relations and consumer affairs, filed suit against the company in Mobile District Court, charging breach of contract, fraud and defamation.

Finchem, who left Delchamps two weeks ago, claims she was forced out of her positions as vice president of benefits and corporate secretary and accused the company of unequal compensation and advancement opportunities based on gender.

Also named in the suit were Randy Delchamps and Timothy Kullman, senior vice president and chief financial officer.

In another suit, filed July 14, attorneys for one current and one former employee are seeking class-action status for a federal lawsuit charging the company with discrimination against blacks in hiring and promotions.

In the suit, the former employee alleged that she "was forced to work in a racially hostile and offensive work environment." The suit also claims a supervisor referred to her with a racial slur.

The company has declined comment on the litigation.

To add to the turmoil for shareholders, the chain's proxy statement, issued in September, revealed that Randy Delchamps -- who resigned after being sued by three former Delchamps executives for alleged mismanagement and a 93% decline in the company's profits -- received $968,959 in severance pay and a $155,100 longevity bonus in addition to his $342,630 salary.

The three executives were fired, sued and eventually reached an out-of-court settlement with Delchamps and the company, as reported.