SHAW'S SET TO BROADEN STORE REACH TO NEW YORK

JENNIFER L. BALJKO

EAST BRIDGEWATER, Mass. -- Shaw's Supermarkets here last week unveiled plans to open stores in New York -- its first locations outside New England.

The chain, owned by London-based retailer J. Sainsbury plc, said it will open a 65,000-square-foot unit in New Rochelle, in New York's Westchester County, in 1998. It also has leases or agreements with developers for eight more stores in New York's Rockland, Orange and Westchester counties and is exploring other potential sites there, spokesman Bernie Rogan said.

Also last week, Shaw's announced two moves to fill in its New England trade area.

The chain plans to open its first store in Boston in the fall of 1997 and eventually will add several more stores there, Rogan said. Shaw's already operates numerous stores in suburbs surrounding greater Boston.

And following up an agreement in July, Shaw's said it has completed negotiations to buy 11 Edwards supermarkets, one Stop & Shop supermarket and two undeveloped Edwards sites from Ahold, Zaandam, Netherlands, for $52 million. Thirteen of the locations are in Connecticut, and one is in Rhode Island. Combined with a half-dozen new stores planned for Connecticut, Rogan said, the deal would boost Shaw's presence in the state from five to nearly 25.

The transaction with Ahold still awaits final approval by the Federal Trade Commission, which required the Dutch retailer to divest 31 New England stores when it acquired Stop & Shop Cos., Quincy, Mass. Ahold also is negotiating deals to sell five stores each to Bozzuto's, Cheshire, Conn., and Big Y Foods, Springfield, Mass. Star Market, Cambridge, Mass., was slated to buy seven of the sites, but withdrew its letter of intent over the summer, an FTC spokeswoman said. Star officials did not return phone calls for comment last week.

Shaw's expansion efforts are intended to broaden the chain's customer base, according to Rogan. But industry observers said the moves support Sainsbury's commitment to U.S. growth and the 101-store chain.

"We have grown in New England all of these years," Rogan told SN. "New England has a population base of 12 million people. The New York metro area affords us the opportunity to provide Shaw's services to 17 million people. It's a natural continuance as we advance through Connecticut."

Mark Husson, managing director at J.P. Morgan Securities, New York, also said Shaw's move into the Empire State makes geographical sense.

"They have marched most of the way down Connecticut and logically New York is the next big prize," he explained. "It's quite a brave move for Sainsbury, but it also shows a degree of confidence that Sainsbury is showing in the Shaw's business after several years of struggling to understand the dynamics of retailing in the United States."

Metro New York offers a good opportunity for Shaw's and the move should be welcomed by consumers, analysts told SN, noting that the market lacks a dominant operator and that many neighborhoods don't have big, modern supermarkets like Shaw's.

"The natural conclusion would be that they are staking out territory for a more substantial entry into southern Connecticut and Westchester County. I think this will be a normalization of competitive levels," said Gary Giblen, managing director at Smith Barney, New York. "You have some of the most affluent areas in the country here shopping at far substandard stores. Anywhere else in the country, you have beautiful, gleaming new stores."

Since the leading supermarket operators in those areas -- ShopRite, Pathmark, A&P and Grand Union -- altogether control about 50% of the market, Shaw's is in a good position to secure some share there, said Bob Lupo, an analyst at B.A. Securities, Chicago.

"The New York market is a very fragmented market. Nobody has command of the market. It's an easy market to enter from that standpoint if you have the financial wherewithal to sustain the drive, because it is not controlled by any single player," Lupo said. "A new player with the financial wherewithal and the strategy could successfully penetrate that kind of market."

Observers noted that Shaw's New York entry may coincide with a move by Giant Food, Landover, Md., into New Jersey, Delaware and Pennsylvania. Sainsbury owns 50% of Giant's Class AL voting stock and in August boosted its nonvoting stake in Giant from 16.3% to 19.7%, triggering industry speculation that it aims to acquire Giant in the near future.

"Just like Ahold has a plan for the East Coast, so does Sainsbury," Husson said, referring to Ahold's increased U.S. presence. Husson did not elaborate on what Sainsbury's goals in the region may be.

Asked if Shaw's and Giant's expansion moves may be part of a bigger U.S. strategy by Sainsbury, Lupo said, "I wonder if they are beginning to launch their strategy into the New York metro area. It sounds that way."

Sainsbury officials could not be reached for comment.