SUPERVALU TO EXPAND SAVE-A-LOT

MARK TOSH

MINNEAPOLIS -- Supervalu plans to expand its Save-A-Lot limited-assortment store format by about 105 stores in the current fiscal year, according to Michael Wright, chairman, president and chief executive officer of Supervalu here.

This includes the addition of about 20 new corporate Save-A-Lot units, which would raise Supervalu's corporate Save-A-Lot group to 95 stores. The other 85 new Save-A-Lot stores planned for the current year will be licensed to independents.

Wright discussed the expansion plans at the company's annual meeting here last week.

In addition to the 105 new units, Supervalu plans to convert 30 Texas T limited-assortment stores, acquired in May, to the Save-A-Lot banner over the next several months. The Texas T stores operate in the Dallas-Fort Worth, Texas, market.

Wright said the deal for Texas T, which included a distribution center, should be an important addition to Save-A-Lot operations.

The Texas T acquisition expands Supervalu's corporate store base, and is expected to improve wholesale operations, according to Wright. With the addition of Texas T's distribution center, Supervalu expects to reduce its distribution costs for customers in that market.

Overall, Supervalu expects to increase its corporate-owned retail square footage (excluding the Texas T deal) by about 9% in the current year, Wright said at the meeting. The company operated 295 retail stores as of June 18.

Wright also told shareholders last week that fiscal 1994, which ended in February, was a year of extraordinary accomplishment for Supervalu.

Wright said accomplishments included the completion of the administrative integration of Wetterau, which Supervalu acquired in late 1992; the consolidation of three distribution facilities, and the agreement to acquire Sweet Life Foods, a leading New England wholesaler.

The administrative integration of Wetterau will produce annualized benefits of $25 million. The next phase of the Wetterau integration, facilities consolidation, is under way and is "absolutely necessary to remain competitive," Wright said.

The acquisition of Sweet Life Foods, Suffield, Conn., which was completed earlier this year, also is beginning to aid Supervalu's results. With the addition of Sweet Life's wholesale business, Supervalu was able to overcome food-price deflation in the first quarter and report a 2.5% increase in wholesale distribution sales, according to financial results the company announced in conjunction with the annual meeting.

Total sales in the quarter ended June 18 rose 2.4% to $5 billion, and net income fell less than 1% to $50.6 million. (See related story, Page 8.)

Wright also told the annual meeting that Supervalu had "made excellent progress" toward the three strategic objectives it outlined several years ago. Those objectives are to take advantage of industry consolidation opportunities, develop an international competency and increase its corporate food-retailing operations.

In fiscal 1995, Wright said Supervalu intends to expand its corporate-store base through "self-development and acquisition." Between 30 and 35 new corporate stores, including as many as nine Cub Foods stores and 20 Save-A-Lot units, are expected to open.

In the five-year period from 1990 through 1994, corporate retail sales have increased from 16% to 23% of Supervalu's annual sales. The number of stores had more than tripled from 76 to 258 at fiscal 1994 year end. Corporate retail stores also build on synergies with Supervalu's wholesale operations, which can lead to improved profitability, Wright said.

Supervalu also plans to expend "considerable resources" in fiscal 1995 to improve its wholesale business, Wright said. And about $150 million is earmarked to "support the development and growth of our independent retailers," Wright said.

Following the success of its first regional food-buying office, Supervalu expects to add two more regional purchasing offices -- one in the upper Midwest and one in New England -- this year, he said. The company's initial regional buying office, in the Southeast, already has reduced product-procurement costs.