GRAND UNION PLANS TO TURN AROUND SALES

GREG GATTUSO

MAHWAH, N.J. -- Grand Union Co.'s new management team told shareholders last week that its strategy to turn around the company's slumping sales would be reflected in the next quarterly report.

Speaking here at the company's annual meeting, Chief Executive Officer J. Wayne Harris acknowledged that the first half of the fiscal year was a disappointment. (As reported in SN, sales for the first half of fiscal 1997 dipped 2.6% to $1.2 billion. Comparable-store sales fell 1.7% in the period.)

At last week's meeting, however, Harris and Gary Philbin, Grand Union's president and chief merchandising officer, laid out plans for reviving the company over the next few quarters.

"Our first half was clearly disappointing," said Harris, who came to the Wayne, N.J.-based chain in August after leaving the top post at A&P Canada. "Our second half will be much better as we are seeing a substantial improvement in our store contribution results.

We are now seeing improvements in both gross margin and promotional allowance funds as a result of sharper buying and pricing for faster merchandise turns.

"We have also dramatically lowered our overall expense ratios with an eye toward eliminating everything that is not directed at running better stores, giving friendly service, providing quality product at value prices, and, of course, the technology to monitor and refine information for future growth.

"Our third-quarter results will be reported in late January, and they will be substantially better," he added.

Key to Grand Union's strategy is its personnel. Harris said the company recently held a meeting attended by all store general managers -- the first such assembly in 10 years.

"We explained the problems of the past, where we are now and where we have to take the company, and the difference that each individual can make in the success of our initiatives to grow a profitable business," he said.

According to Harris, store managers will be essential to the company's goal of tailoring every store to its neighborhood.

To incent productivity and better customer service, shareholders here approved a plan that would allow all associates to purchase shares of common stock at a 15% discount through payroll deductions or direct payment.

The company also granted stock options to management associates and launched a performance-based second-half bonus program for executives.

"The end result of these initiatives, as well as some other steps we have taken, will be a unified cohesive team -- all aware of their goals and all joined together in working hard to meet and exceed our company's performance goals," Harris said. "Associates have figured out that they make the difference. As the company does better, they do better."

Philbin, who joined the company about two months ago from Cub Foods, Stillwater, Minn., said Grand Union's focus in the second half of the fiscal year will be on stabilizing and growing its existing sales base.

"Clearly, our focus is on sales," he said. "But to achieve this, it's important that we reduce our expenses and reinvest these savings back into our sales plan. We will drive more sales, sell more cases for our vendor partners, get better deals, turn merchandise quicker through our stores and create excitement for our customers that will make them look for the Grand Union ad each week."

Remarks by Harris and Philbin were well received by shareholders.

As one put it, "We bought Grand Union as a turnaround stock. We're counting on you."