NORTHLAKE, Ill. -- Competitive pressures have prompted Dominick's Supermarkets here to speed up its remodeling efforts at 13 former Omni stores that were renamed Fresh Stores late last year, the company said last week.
Chain officials acknowledged that the effect of remodeling activities on store sales resulted in flat operating cash flow for the second quarter ended April 18.
The company said it expects to complete all 13 remodelings by late spring or early summer, rather than its original target date of late summer.
A corporate spokesman told SN the accelerated remodeling schedule was prompted by heavy promotional activities by Dominick's two major competitors in the Chicago market: Jewel Food Stores, Melrose Park, Ill., a division of American Stores Co., Salt Lake City; and Cub Foods, a division of Supervalu, Minneapolis.
"Although those promotional efforts were not unexpected, they caught us at an inopportune time, when we were in the midst of remodeling a group of stores that account for more than 20% of our selling footage," the spokesman said.
He declined to pinpoint the sales effect of ongoing remodeling at the former Omnis but said sales have fallen "somewhat" because of the disruptions at store level. The company acknowledged in December that sales at those store had fallen an average of 25% during the first two months after the Omnis were rebannered.
Dominick's disclosed in mid-October that it would convert 13 of its 17 price-impact Omni combination stores to the Fresh Store format "because the economics are compelling," Robert A. Mariano, president and chief executive officer, said at the time. "The Fresh Stores approach is in sync with the desires of today's consumers, and the format has shown exceptional performance, driven by higher sales per unit, increased traffic and superior profitability with an enhanced mix of higher-margin products."
The four Omnis that were not rebannered as Fresh Stores were converted to the conventional Dominick's format.
After rebannering the other 13 stores, the chain initially added some of Dominick's basic service departments and private-label lines, with plans to bring the stores up to Fresh Store standards by late summer.
However, rather than remodel stores in three phases, on a geographic basis, as originally planned, the increased competitive pressures prompted the company to initiate across-the-board remodeling efforts at all 13 stores. Each remodeling, which takes 18 to 22 weeks, will involve expansions of the deli, floral, meat and other perishables departments and the addition of Corner Cafes (for in-store dining).
"We anticipate we will pick up a good deal of volume once the remodeling is completed, though it will probably take a couple of quarters to rebuild the sales levels," the spokesman told SN.
Once the conversions are completed, 65 of the chain's projected 116 stores will be operating under the Fresh Store banner, he added, including the 13 conversions and 13 new stores slated to open this year.
The company said it expects to release second-quarter results May 20.
The former Omni stores account for approximately 23% of the company's selling square footage, chain officials said, compared with 37% for Fresh Stores and 40% for conventional and combination-store Dominick's units.
By the end of fiscal 1998, Mariano said, Dominick's Fresh Stores are expected to comprise approximately 56% of the chain's store base.
