HANNAFORD BROS. EXPECTS CONTINUED GROWTH

SCARBOROUGH, Maine -- Hannaford Bros., coming off a strong 1997 in terms of sales and earnings, expects to continue to grow through capital expenditures in 1998, according to the chain's annual report.rth Carolina, South Carolina and Virginia, with sales of $3.2 billion in the 53-week year, a 9.1% increase over the previous year, which had 52 weeks. Comparable-store sales, adjusted for the extra week,

SCARBOROUGH, Maine -- Hannaford Bros., coming off a strong 1997 in terms of sales and earnings, expects to continue to grow through capital expenditures in 1998, according to the chain's annual report.

rth Carolina, South Carolina and Virginia, with sales of $3.2 billion in the 53-week year, a 9.1% increase over the previous year, which had 52 weeks. Comparable-store sales, adjusted for the extra week, increased 2.3% for the year. Identical-store sales, also adjusted for the extra week, increased 0.4%.

Although most of Hannaford's sales were done at the retail level, the company also posted modest gains in wholesale sales to independents and from other sources, such as real estate, trucking and home shopping, the report said.

Earnings from continuing operations increased 12.3% to $84.4 million, or 2.6% of sales. "Traditional competition continues to increase, both in terms of new stores and merchandising aggressiveness, while new types of competitors attempt to attract market share from traditional supermarkets," said Hugh G. Farrington, president and chief executive officer, in his letter to Hannaford shareholders. "There is little inflation to cushion the bumps."

As reported in SN, the chain closed seven stores in non-core markets last year -- five older stores from Hannaford's 1994 acquisition of Wilson's, and two new Hannaford stores, one each in North Carolina and Virginia.

"Because these seven stores were all in towns well removed from our core southeast markets with very limited opportunity to improve our presence there, we decided to close them and focus on the key markets of Raleigh, Charlotte, Wilmington, Richmond and Hampton Roads," Farrington said.

Store closings notwithstanding, Farrington said the company will continue to invest in North Carolina and Virginia and sees "a bright future in our core southeastern markets."

The chain spent $168 million in 1997 on its capital program, and opened nine new stores and remodeled four others. In addition, a new distribution center in Butner became fully operational.

"Our stores made excellent progress in the important areas of operating conditions, staffing and gross margin achievement," Farrington said. "By year end, several of these stores were profitable and we expect continued improvement in 1998."

Farrington said the impetus behind the chain's strong year was the performance in Hannaford's northeast base.

"We continued to grow sales and profits followed," he said. "Our new and replacement stores were very well received, and extensive work on our produce offering is paying dividends. In New York state, where we face strong competitive pressure, we are investing in store modernization and aggressively working to retain our current customers and attract new ones."

The chain said 1998 will continue to see the rollout of new merchandising ideas, particularly in fresh departments, plus an investment in customer service, technology and capital expenditures, and reduction of operating costs. According to the annual report: Hannaford will continue its experiment in home delivery -- Hannaford's HomeRuns -- despite the snags of a new start-up program. The program allows consumers to place orders by phone, fax, or Internet (www.homeruns.com).

"The start-up has taken longer and been somewhat more costly than we anticipated," Farrington said. "Since it's a new venture, there are no models to follow or computer systems available to operate the business. Through our own research and experience, we are learning about customer needs and the logical systems required to deliver groceries through this channel.

"We will continue this experiment in 1998. Our goal is to position Hannaford to capitalize on the enormous potential of this new business channel and to evaluate whether it can provide a healthy return for our shareholders."

The company also is looking to increase margins through continued effective control of selling, general and administrative expenses, and a greater understanding of customers' preferences and Hannaford's sources of profit, Farrington said.

The chain will continue its Spectacular Produce program, which debuted last year.