QFC VOLUME CLIMBS, NET FALLS IN QUARTER

GLEN A. BERES

BELLEVUE, Wash. -- Quality Food Centers here said acquisitions and remodels contributed to higher sales during the first quarter ended March 25.

However, continued food price deflation and increased competition offset some of those gains. And a one-time charge related to the 60-store chain's recently completed recapitalization depressed income.

Net earnings for the 12-week period were $3.8 million, down 30.6% from last year. Earnings for the latest quarter reflected $1.4 million in fees paid in connection with the company's recapitalization and tender offer completed March 29.

As reported, the company bought back 7 million shares of its common stock and entered into a new $220 million credit facility to finance the tender offer. Sales for the quarter were $138.9 million, up 14.8% from last year's first quarter. The increase reflected the contributions of seven stores opened or acquired in 1994; two remodels completed during the quarter, and 12 units acquired in a merger with Olson's Food Stores, Lynnwood, Wash., in February, as reported.

Stuart Sloan, chairman and chief executive officer, said the company added 239,000 square feet, or 22%, of selling space last year. He also said the company has already added more than 500,000 square feet in 1995 -- a 40% increase -- and is "actively pursuing other new store sites and acquisition opportunities."

This summer, the company expects to unveil a new replacement unit for a Rainier Valley, Wash., store it acquired and demolished earlier this year. In addition, three sites that were part of the Olson's deal are slated to open in late 1995 or early 1996; a fourth store, being built as part of Seattle's Harvard Market retail development project, is scheduled to open in 1996. Same-store sales slipped 0.8% during the quarter. QFC attributed the slide to continued food price deflation of 1% and new store openings/remodels by competitors in certain QFC markets.

Bob Toomey, an analyst with Piper Jaffray, Seattle, said expansion for QFC is crucial because the company has been losing market share to Safeway and Albertson's in the Seattle/Puget Sound region.

"They are really being squeezed," he said. "The financial reorganization provides them with added capital to expand. Economies of scale is the name of the game in this business. QFC has a lot of work to do over the next two to three years."

1ST-QUARTER RESULTS

Qtr Ended 3/25/95 3/19/94

Sales $138.9 million $121 million

Change 14.8%

Same-store -0.8%

Net Income $3.8 million $5.5 million

Change -30.6%

Inc/Share 19 cents 28 cents