NEW PATHMARK CEO EXPECTED TO HEAT SALES

ELLIOT ZWIEBACH

WOODBRIDGE, N.J. -- Pathmark Stores' appointment last week of Safeway executive James Donald as chairman, president and chief executive officer could provide a needed sales spark at the 143-unit chain, industry observers told SN.

Donald, 42, is slated to join Pathmark here in the next few days after wrapping up responsibilities as manager of Safeway's 130-store Eastern division, based in Lanham, Md. He also is a corporate senior vice president of Safeway, Pleasanton, Calif.

In going to Pathmark, Donald succeeds Jack Futterman, who resigned as chairman and CEO in March, and Anthony J. Cuti, who resigned as president in April to head Duane Reade, a New York drug store chain. John W. Boyle, a board member, has been Pathmark's interim chairman and CEO.

Succeeding Donald at Safeway will be Michael J. Bessire, 41, who has been vice president and manager of retail operations for the Eastern division since February 1995 after three years with H.E. Butt Grocery Co., San Antonio, and 20 years with Albertson's, Boise, Idaho.

"Having participated in the development of Albertson's, Wal-Mart and Safeway franchises over the last 20 years, I look forward to working toward the growth of the Pathmark franchise, already one of the strongest in the Northeast," Donald said in a prepared statement. He declined a request to be interviewed.

Commenting on Donald's appointment, Boyle said in a statement, "Jim Donald is known throughout the industry as one of the brightest of the new generation of managers in the business, with an impressive record of sales and earnings growth throughout his career. As a hands-on, customer-oriented executive, he is an excellent choice to lead Pathmark's future growth."

Pathmark's supermarkets are in New York, New Jersey and Philadelphia. Sales for the year ended Feb. 3 were $4.18 billion, virtually flat compared with prior-year results.

The move to hire Donald should help Pathmark reinvigorate sales, industry analysts told SN.

Donald is "one of the best line managers in the industry, and hiring him is a total home run for Pathmark in terms of what it needs," said Gary Giblen, managing director at Smith Barney, New York.

"What [Pathmark] doesn't need is an executive to cut costs because that's already been done, and the company has improved margins by increasing the distribution of perishables and private label," he explained.

"However, sales have been anemic, and the organization has been in the doldrums because of a lack of clear initiatives. What it needs now is a reigniting of its sales momentum, and that's where Jim Donald comes in. He's a real organization builder and a very motivating kind of executive, with excellent credentials in store merchandising and operations, and those skills would really galvanize Pathmark at store level and get sales going again."

Donald's experience at Safeway exposed him to operating a large number of urban stores, Giblen added. "That should be helpful at Pathmark because it has a lot of stores in those kinds of inner-city neighborhoods."

An experienced supermarket executive like Donald is just what Pathmark needs to chart growth, according to Ed Comeau, a securities analyst with Donaldson Lufkin & Jenrette, New York.

"Pathmark has a wonderful franchise but a long run ahead of it in the next couple of years that will require a really solid senior executive to guide it, and Jim Donald seems to be one of the best all-around executives it could have hoped for," he explained.

"The company is highly leveraged, and business has been relatively flat for two years. And while the Pathmark 2000 stores are doing well, the chain needs to build better sales momentum and achieve greater cash-flow growth and position itself at some point to go public."

The decision to hire someone from another company gives Pathmark a fresh perspective as it looks for ways to bolster volume, Comeau noted. "Bringing in an executive from the outside may make it easier to change. Based on his experiences at Safeway, Donald will clearly have a good knowledge of how to turn sales around that he can apply at Pathmark." Safeway's competitors in the Washington-Baltimore area, Comeay said, have told him that Donald's arrival there in February 1994 "coincided with a period in which the division became a sharper operator across the board. The stores looked better, they became more competitive and employees appeared better motivated and better trained. His skills are apparently built around team-building and his ability to get people motivated and focused." Before joining Safeway, Donald was hired by Wal-Mart Stores, Bentonville, Ark., in 1991 to supervise the growth of its supercenter operations, with responsibilities for all merchandising, distribution, store design and real estate operations. During his tenure at Wal-Mart, the number of supercenters grew from six to 138.

Preceding Donald's stint at Wal-Mart was a 15-year career at Albertson's, where he was in various management positions in Florida, Alabama and Texas before being named vice president of the company's Phoenix-based division in 1989. Donald began his supermarket career in 1971 as a trainee with Publix Super Markets, Lakeland, Fla.