MOBILE, Ala. -- Following disappointing sales and earnings in two consecutive quarters, Delchamps last week unveiled a restructuring plan it hopes will "streamline operations and improve its earnings potential."
The chain's plan, called Delchamps Strategy 2000, places the company on the growing list of retailers undergoing restructuring. The new program includes closing several units and reducing positions and salaries.
According to a statement, Delchamps' plan includes:
Closing four Louisiana stores by Feb. 25.
Consolidating administrative departments to streamline operations and eliminating an unspecified number of middle and senior management positions.
Redesigning store and warehouse operations and intensifying
individual training to maximize productivity and efficiency.
Building and remodeling stores to achieve more efficient and economical operation.
Reducing the salaries of personnel participating in the company's management incentive program, from Randy Delchamps' office down through middle management. Randy Delchamps is the chain's chairman, president and chief executive officer.
The company could not be reached for further comment.
Delchamps will record a third-quarter restructuring charge of about $15 million to account for the closing of the four stores as well as 10 previously closed stores that the company has been unable to sell or fully sublease.
As reported, the company's net earnings dropped 54.2% in the first quarter ended Oct. 1 and 93.3% in the second quarter ended Dec. 31. Sales fell 0.1% in the first quarter and 5.1% in the second quarter.
Delchamps has attributed many of its problems to increased market competition that dug into gross margins. The company has estimated that 119 new stores from competitors such as Albertson's, Bruno's, Publix and Winn-Dixie will have opened in its market by the end of 1995. Wal-Mart and Kmart have also entered the territory with supercenters.
"This corporate restructuring, combined with new strategic and aggressive merchandising and marketing plans, will provide the impetus for Delchamps to move forward, leaner and well positioned to better meet the competition," said Randy Delchamps in a statement.
"This will also enable us to provide our customers more of what they want in terms of merchandise, spotless stores and service at more competitive prices," he said.
Gary Giblen, a securities analyst with Smith Barney, New York, said he views Delchamps' moves favorably. "You really have to manage to keep your operating expenses down because you have other competitors coming at you. It's an increasingly competitive market -- alternative formats are coming in, especially in the Southeast where there's a lot of Wal-Mart activity."
