RALPHS REPORTS LOSS, INCREASE IN VOLUME

ELLIOT ZWIEBACH

COMPTON, Calif. -- Ralphs Grocery Co. here -- the new entity created by the June merger of Food 4 Less Supermarkets, La Habra, Calif., and Ralphs -- reported increased sales and a loss for the second quarter ended July 16. The company also disclosed that 26 of the 27 stores it was ordered to divest by the California attorney general have been sold, though several will continue to operate under their prior names for another few months. A spokesman declined to pinpoint the buyers, indicating only that all were local independent operators. Reflecting on second-quarter results, the company said comparisons with prior periods are not meaningful because the current numbers reflect four weeks of operation of the combined companies and eight weeks of operation of the premerger Food 4 Less while completely excluding the results from operations of the premerger 174 Ralphs for those eight weeks. Sales for the 12-week quarter rose 48% to $857.3 million, while same-store sales declined 3.6%. Sales for the half were $2.5 billion.

The company reported a net loss of $125.7 million for the quarter, compared with net income of $2.6 million a year ago, and a loss of $132 million for the half. The company said results for the quarter are in line with expectations and are largely attributable to extraordinary charges totaling approximately $116.7 million, including merger-related transaction expenses of approximately $30 million; nonrecurring restructuring charges of $63.6 million, and an extraordinary nonrecurring charge of $23.1 million related to the repayment of existing Food 4 Less debt.

Excluding merger-related transition costs, the company said it generated operating cash flow of $50.5 million for the quarter, or 5.9% of sales, and $81.6 million for the 24-week period, or 5.5% of sales.

Byron Allumbaugh, chief executive officer, said, "We are very excited about the sales increases and positive customer response we have experienced. Although only four weeks of the new company's operations are reflected in the financial statements reported, we are pleased with the initial results. "The restructuring charge and extraordinary writeoff of debt costs are nonrecurring charges. Merger-related transition costs, which will continue for several quarters, were as planned. "These charges and expenses are necessary to complete our integration plan for the two companies and are expected to continue for the remainder of the fiscal year." Ralphs operates 313 conventional supermarkets and 55 Food 4 Less warehouse stores in southern California, plus 62 stores in northern California and the Midwest. Since the merger, 83 former Alpha Beta, Boys and Viva stores have been converted to the Ralphs format and a few Ralphs stores have switched to the Food 4 Less price-impact warehouse format.