NORTHLAKE, Ill. -- Dominick's Finer Foods here is getting "fresh" with local consumers. Based on the success of 13 conventional stores that have been converted to the Dominick's Fresh format over the past two years, the company is accelerating its expansion plans for the format over the next 18 months, Robert Mariano, president and chief operating officer, told SN last week. Dominick's Fresh stores emphasize perishables and prepared foods. Since November 1993 the chain has invested $70 million to convert 13 existing stores to the Fresh format. In an interview with SN, Mariano discussed several reasons for his positive outlook about the chain's fortunes, including the following:
The positive consumer response to the Fresh store concept helped boost the chain's third-quarter sales results.
quarter sales results.
The availability of additional capital from Yucaipa Cos. -- a Los Angeles investment group that acquired the 97-store chain last spring for $749 million -- will enable Dominick's to accelerate its expansion plans from two new stores to seven over the next year and a half.
Plans to leverage Dominick's buying power with other Yucaipa affiliates are on schedule to begin sometime in 1996. According to Mariano, sales at the converted Fresh stores had a major effect on overall sales results for the third quarter and 40 weeks ended Aug. 5, although the closure of four stores and the inclusion of the post-Easter week had a negative effect on results. Sales slipped 0.8% during the 16-week quarter to $744.1 million but rose 1.1% for the 40 weeks to $1.9 billion. Same-store sales for the quarter rose 0.6%, or 1.5% if the effect of the post-Easter week is included. Mariano declined to pinpoint same-store sales for the year-to-date. He said the third-quarter increase in same-store comparisons marked the second consecutive quarter in which same-store results have risen -- results he attributed to the maturing of the Fresh stores. "We are very pleased with the strong performance we are realizing from our Fresh store conversion program," he said. "The continued growth in comparable-store sales reflects . . . the enthusiastic response by our customers to this exciting concept." During the quarter Dominick's used proceeds from an offering of $200 million of 10.875% senior subordinated notes, due in 2005, to repay certain existing debt, which resulted in the noncash extraordinary loss of $4.6 million on early extinguishment of debt. That loss contributed to a net loss for the quarter and the 40 weeks -- a loss of $5.7 million for the quarter, compared with net income of $4.6 million a year ago, and a loss for the 40 weeks of $1.8 million, compared with net income of $5.5 million last year. The company said it generated slightly higher operating cash flow for the quarter -- $35.5 million, or 4.8% of sales, compared with $34.5 million, or 4.6% of sales, a year ago -- and flat results for the 40 weeks -- $87.2 million, or 4.6% of sales, compared with $87 million, or 4.6% of sales, a year ago. Mariano said Dominick's plans to open two more Fresh stores this year -- its first ground-up Fresh in Northfield, Ill., scheduled for a soft opening Oct. 12 and a grand opening Nov. 14; and a conversion in Banockburn, Ill., scheduled to open Oct. 26. Dominick's had originally projected two more stores for 1996, Mariano noted. But with an infusion of capital from Yucaipa, the chain now anticipates opening seven more stores in the next 18 months, although Mariano declined to pinpoint how many would be Fresh units. "Our entire organization is very excited about this significant growth in our business, which follows on the heels of our successful Fresh store-conversion program," Mariano said. He said all future stores will be either Fresh combination stores or Omni superstores. The Northfield Fresh store will be a 50,000-square-foot unit with no significant differences from converted units, Mariano said. However, the Banockburn store will be 60,000 square feet and will feature an in-store eating area with seating for 100 to 110 people, he noted. As Dominick's accelerates new-store construction on Fresh units, "we're looking at a 67,000-square-foot prototype," Mariano said. New-store growth will be limited to Dominick's current operating area for the next few years, he said. "We will continue to expand in the Chicagoland marketing area, and we are not looking at sites outside that area at this time," Mariano told SN. Mariano said the company is looking forward to leveraging the combined buying power of the various chains Yucaipa owns sometime next year. "We're on plan in working to develop synergies with Ralphs, Smitty's Super Valu and Food 4 Less," he said, referring to Yucaipa-owned companies based in Compton, Calif.; Phoenix, and throughout California and the Midwest, respectively -- companies with a combined sales volume of about $9 billion. "It will be a collaborative effort among all Yucaipa affiliates to negotiate purchases as a single group," Mariano said. He said he anticipates that effort will begin sometime during Dominick's next fiscal year, which begins Nov. 1.
