SUTTON PLACE GOURMET PLANNING EXPANSION

DAVID ORGEL

NEW YORK -- Sutton Place Gourmet, Rockville, Md., plans to double its store count over the next four years as the niche retailer expands its presence along the East Coast, top executives said at a conference here.

The 15-unit operator, known for its upscale prepared foods and superior service, is benefiting from enhanced financial backing and greater demand for quick meals.

"We'll have 16 stores by year-end and will double to 32 stores over the next four years," Gary Evans, chief financial officer, said at the Consumer/Specialty Retailing/Restaurant Conference sponsored by Robertson, Stephens & Co., San Francisco. "We'll strategically place large units, but mid-size units will drive our growth."

Mid-size for Sutton means about 8,000- to 10,000-square-foot stores. The company currently operates in the Baltimore/Washington area; Fairfield County, Conn.; and Westchester and Long Island, N.Y. It is eyeing additional real estate in those markets and is also looking at northern and southern New Jersey and Philadelphia, Evans said.

It took the 17-year-old retailer 14 years to reach volume of $50 million. But that doubled over the past three years to about $100 million, Evans said. Sharp growth should enable the company to reach $250 million over the next three years, Evans added.

The company is experiencing strong sales per square foot and good comparable-store sales growth despite hefty competition in its trading areas.

"There's a lot of competition, including Fresh Fields, Whole Foods, Bread & Circus and Trader Joe's," Evans said. "But mature stores are still comping on a positive basis."

Evans added, however, that the chain needs to maintain its uniqueness in order to grow share in a relatively small niche.

The privately held company has benefited from private-equity infusions of $10 million in 1994 and $22 million last year. The latter investment enabled the company to build three additional stores, including one in Woodbury, N.Y., which opened last September.

That unit was Sutton Place's entry into the New York City marketplace. The operator is expecting to receive additional investments in 1998 that will help continue the unit growth, Evans said.

Thomas Johnston, president and chief executive officer, told the conference that the chain's emphasis on carrying unique products is a major asset.

"About 60% of the store's products, such as in meat and seafood, are unique to us, and that is growing to about 70%," he said.

Johnston said that while supermarkets excel in the nonperishables side of food retailing, Sutton Place is targeting the specialty area with superior perishables, theatrical lighting, themed food celebrations and a focus on everyday home-meal replacement. "There's about a $13 billion niche in the industry for Sutton Place's type of business, and we're seeking about a half-billion dollar business," he said.