NEW CEO OUTLINES PLAN FOR BRUNO'S

LISA A. TIBBITTS

BIRMINGHAM, Ala. -- Bruno's here has charted a plan to improve operations by focusing on areas such as enhanced merchandising and unit growth, William Bolton, the company's new chairman and chief executive officer, told analysts last week.

During a conference call to analysts and investors, Bolton also pointed to top management positions the company has recently filled and explained how Bruno's is attempting to improve its balance sheet. Nils Brauf, an associate with Kohlberg Kravis Roberts & Co., New York, also participated in the call.

According to analysts, among the plans announced by Bolton were:

Opening 10 to 12 new stores annually.

Selling off $40 million to $50 million worth of excess real estate.

Growing private label, which currently amounts to a smaller percentage of sales compared with industry standards.

Installing new technologies to improve areas such as warehouse operations.

Bolton's announcements came as the company released financial results for the first quarter ended Sept. 23, the first results released since it merged with a subsidiary

of investment firm KKR in August. Those results showed a net loss of $26 million and an incremental sales increase.

Although Bolton could not be reached by SN for comment, Susan Fitzgibbon, Bruno's director of financial planning, said that the company has hired a new senior executive vice president of merchandising, Michael Heintzman, and a new executive vice president of operations, Dave Clark. No further information was available about the executives.

She said the chain is still in search of a chief financial officer, general counsel and marketing and human resources directors. The company's expansion initiatives call for the opening of eight new Bruno's units this year and 10 to 12 units in successive years.

"We've already opened two in the first quarter in Alabama and Georgia. There are also going to be two in Tennessee this year. They're in existing markets," said Fitzgibbon.

To continue paying off some of the long-term debt Bruno's accumulated when it merged with Crimson Acquisition Corp., an arm of KKR, the chain plans to sell off excess real estate. Long-term debt increased from $271.1 million to $868.4 million due to costs related to the merger.

Fitzgibbon characterized the real estate as "non-operating surplus" but said she could not quantify the value of the property. Frederick Taylor, director of corporate bond research at Salomon Bros., New York, said the real estate scheduled to be sold is worth $40 million to $50 million.

During the conference call, Bolton said one of the company's goals is to increasingly emphasize private label, according to analysts.

According to Taylor, Bruno's private label currently accounts for 10% of dry grocery sales compared with an industry average of 19%.

Further, Bruno's is currently working on investing in new technologies. "We are primarily right now working on purchasing. The purchasing system is also tied into our warehouse," Fitzgibbon said.

Bruno's financial results were released in the form of a 10-Q, which the chain is required to file with the Securities and Exchange Commission. The company said this quarter's results "are not necessarily indicative of the results which may be expected for the entire year," and analysts agreed.

They cautioned that the first quarter of fiscal 1996 is a transitional one, adding that Bruno's seems to be on the right track, having received the proper guidance from KKR.

Net sales increased 0.24% and same-store sales increased 1% for the 12 weeks ended Sept. 23. At the end of the quarter, the company operated 253 stores, two less than one year ago.

Bruno's experienced a net loss of nearly $26 million compared with net earnings of $11.5 million last year. Gross margins declined from 23.9% to 22.4% of net sales, principally due to a change in the way the company accounts for vendor allowances.

Meredith Adler, managing director of Chemical Securities, New York, said, "On the sales line, I don't think it's anything to be disappointed about or excited about. They did tell us that the next quarter is looking good and comps are quite a bit better so far."

Bob Lupo, senior analyst at BA Securities, Chicago, said he was pleased with the same-store sales increases.

"I do have confidence that with KKR's leadership they'll turn [Bruno's] around," Lupo said.