SMITTY'S EXPANDING FOOD SIDE

ELLIOT ZWIEBACH

PHOENIX -- Smitty's Super Valu here is gearing for further expansion and is refashioning the food direction of its stores.

The chain is increasing its food-to-nonfood ratio and is planning for a program that will eventually lead to entering new markets.

The burst of remodeling activity and charting of expansion plans are the result of the purchase of Smitty's last July by Yucaipa Cos., a Los Angeles-based investment group that has committed $20 million to Smitty's for capital improvements.

Among Smitty's moves are the following:

Expanding the food side of its stores to 50% and shrinking its general merchandise selection to become more competitive with what other local supermarkets are offering.

Charting eventual moves into Nevada and New Mexico while continuing to remodel and grow in its existing region. According to David Green, president and chief operating officer of the 29-unit chain, Smitty's is seeking a 50% to 50% balance of food to general merchandise, rather than the 30% to 70% mix it has historically maintained.

All but two of Smitty's locations are combination stores of 110,000 square feet.

At three remodeled stores where the mix has been balanced, results have been favorable, Green noted. "We've had a very positive sales increase and extremely favorable margin improvements," he said. He declined to be specific.

Smitty's anticipates remodeling

13 more combos by the end of October, Green said. Five other combos have undergone cosmetic changes in the past few years and are not scheduled for further changes.

Smitty's has also opened six new stores during the past five years, including two here at the end of 1994. It has one replacement store under construction here, with an opening date of late May.

Two 40,000-square-foot conventional stores, which had been converted to a Hispanic format and then converted back, will not be upgraded, he noted.

Going forward, Green said Smitty's hopes to open one or two new stores a year.

Once it has its Arizona base of stores in order, Green said the chain will cast an eye toward expansion out of state. "Within three to five years it makes economic sense for us to move into Nevada and New Mexico, which are very similar to Arizona," he told SN.

Prior to Yucaipa's investment, Smitty's had been part of Montreal-based Steinberg, which had not invested much in the company for several years.

As Smitty's remodels stores with its new 50% to 50% merchandising formula, Green said it is increasing space for dry groceries by 40%, for produce by 35%, meat by 30%, dairy by 35% and club packs by 50%.

The chain is also adding a natural foods department featuring vitamins, juices, low-fat products and other health-oriented selections; a 24-foot Deli Express for takeout sandwiches, and a party center that combines greeting cards with gift items.

In the nonfood area it is expanding the pharmacy, health and beauty aids section, video department and seasonal goods, "so not all the nonfood space has been redistributed to grocery," Green said.

In paring back general merchandise, Green said Smitty's is eliminating some hard lines -- including sporting goods, camping equipment, bicycles, fishing gear, weight and exercise equipment and baby furniture -- and some soft lines, primarily higher-ticket fashion goods.

Smitty's will retain activewear and leisurewear, team sports clothing lines, T-shirts, jeans and tank tops, Green said.

"Our total stockkeeping units will be down by 15,000 per store to 85,000 because we're eliminating more general merchandise SKUs than we're picking up," Green said.

Smitty's opened its first stores here in the early 1960s, when its combination of food and general merchandise under one roof was considered unique.

Asked whether the change to a 50% to 50% merchandise assortment would take away some of what has made Smitty's so unique over the years, Green said it would not. "Our remodeled units will still have the largest overall selection of any food-and-drug combination store in town," he said.

"And we're still unique because we still have food service, soft lines, drug store lines, general merchandise and a supermarket under one roof. "And we offer additional branded services, including Bank of America branches, America West ticket counters, Lee Opticals, Cost Cutters [hair cutting], Dry Cleaners USA, Taco Bell and Blockbuster Video."