HOLIDAY FOOD SALES UP; GAINS EXPECTED IN '98

Reported by Elliot Zwiebach, Greg Gattuso and Chapin Clark.

Food retailers experienced modest sales increases over the holidays -- and they were optimistic growth would continue in the new year.

Operators polled in a random SN survey said sales rose 3% to 4% in the weeks leading up to New Year's Eve. They said gains were fueled by loyalty- card programs, improved prepared-foods offerings and promotions on core holiday items.

Turning to 1998, operators were hopeful about building on the sales momentum, but analysts said supermarkets will not be able to rely on help from inflation.

Dan Lescoe, director of marketing for Big Y Foods, Springfield, Mass., said the chain made some modifications to previous holiday selling plans in 1997.

"Big Y did better this Christmas than last because we did a much better job than the competition in catering to details, making sure that we had what the customer wanted rather than what we wanted to sell. That's part of an ongoing effort to pay attention to details -- looking at what we ran out of last year and then determining how many additional cases we can sell of an item like marshmallows.

"We've been offering a loyalty card for the past six years, and that has helped us considerably to find out a lot of detailed information about our customers' likes and dislikes. So we try to raise the bar every year to do a better job than the competition on details. "Going forward, we have to play it close to the vest. There's no longer any way to predict what will happen in any period of one to three weeks over the next month to month-and-a-half. It's like the stock market -- everything is more sporadic, and we haven't seen a lot of trends in the past year, so we just have to watch things more closely. We don't have the kind of stable food economy where weekly spending is spread over a certain period, because there are too many outlets and too much competition available out there." Shoppers Food Warehouse, Lanham, Md., experienced an expected rise in sales in the weeks prior to Christmas, Hanukkah and New Year's Eve, though hard numbers were unavailable.

"The holidays have been pretty good," said Jack Binder, senior vice president of finance. "We've been doing what we have done in the past, mainly focusing on our strong areas -- produce and perishables."

He said upgraded deli and bakery departments generated additional volume during the holidays, and the company expects to maintain that momentum into the new year.

Deli platters were strong sellers, Binder said, along with beer, wine and champagne, where allowed by law.

At Minyard Food Stores, Coppel, Texas, sales rose 4% in the holiday period, according to spokeswoman Debbie Ellis.

The chain attempted to replicate a successful Thanksgiving promotion that offered Butterball Turkeys at 68 cents a pound, and private-label turkeys at 48 cents a pound. The Christmas promotion offered ham at 79 cents per pound.

"We did well with ham," she said, although she declined to be more specific.

Larry Geller, president and chief executive officer at Rosauers Supermarkets, Spokane, Wash., said, "Sales were actually OK [over the holidays]. We had slight increases -- in total, probably 3% to 4%. It was pretty much as expected.

"My personal opinion is that the holiday season doesn't affect the grocery business as a whole nearly as much as it does soft goods, for example."

Geller said the only area where the chain was affected by the weather was Montana, where it was snowing and cold.

Regarding promotions, he said the chain did "nothing significantly different. This was a fairly typical Christmas. We had a reasonably good holiday and we expect that will continue [into 1998]."

Debra Levin, a securities analyst with Morgan Stanley, New York, said the industry is still struggling with low inflation, "but at this point the comparisons will begin getting easier because it's been a year since deflation came in.

"But it's hard to predict what will happen early in the year based on Christmas results because supermarkets are so cash-flow stable, and the fourth quarter is always a better quarter but not a make-or-break quarter for the year as it is for department stores."

Mark Husson, retail analyst for J.P. Morgan, New York, said, "As far as I can tell from most of the food retailers we've talked to, the holidays were good, but not exceptional."

The 3% to 4% increases felt by supermarkets were higher than the overall rise in the retail sector, according to Telecheck, a Houston-based check-acceptance company.

Telecheck said same-store retail sales rose 2.2% in December. The modest increase was attributed to heavy discounting.

Sales were better in the Southeast, where same-store results climbed 4.7%. In the Midwest, sales increased 2.4%. In the Mid-Atlantic, sales rose 1.9%, and in the West, they moved up 1.2%. Sales in the Southwest rose 0.3%, TeleCheck said. In a pre-holiday poll, the National Retail Federation, Washington, said retailers had expected sales to increase 3.8%.

One standout was Wal-Mart, Bentonville, Ark., which reported total same-store sales increased 7.2% in the five weeks ended Jan. 2. Separately, Wal-Mart Stores' same-store sales rose 7%. Same-store sales at its Sam's Clubs division rose 8.1%.