TAMPA, Fla. -- Kash n' Karry Food Stores here said it will enter a three-year agreement by early October with Gooding's Supermarkets, Altamonte Springs, Fla., to supply the 18 Gooding's stores. The pending supply contract, which is unusual in that it involves two retailers, is part of a bolder, more aggressive positioning by Kash n' Karry since it emerged from a Chapter 11 restructuring late last year.
It could generate revenues of $75 million or more per year, said Ron Johnson, Kash n' Karry chairman and chief executive officer. Gooding's posts annual retail volume of about $250 million.
Kash n' Karry also said last week that sales for the year ended July 30 declined 3.7% to $1.03 billion, same-store sales dropped 1% and operating cash flow increased 28% to $54.5 million. In addition to the supply agreement, Kash n' Karry is pursuing growth on a number of other fronts, including the following:
Moving ahead on its new fresh-oriented concept, which features expanded perishables departments and a new decor package.
Pursuing an ambitious remodeling program through the balance of the fiscal year.
Increasing its clout with vendors to purchase goods under more favorable terms. Commenting on the pending supply agreement, Johnson said, "Gooding's operates in [the] fast-growing [Orlando] market not heavily served by Kash n' Karry, and the increased volume [from] the supply agreement will help to reduce handling and procurement costs for Kash n' Karry." Gooding's executives could not be reached for comment last week.
Gooding's is currently supplied by the Quincy, Fla., division of Supervalu, Minneapolis, and the Miami division of Fleming Cos., Oklahoma City. Kash n' Karry operates 99 supermarkets and 33 liquor stores in west central Florida, including two supermarkets on the outskirts of the Orlando market. Raymond Springer, Kash n' Karry's executive vice president and chief financial officer, said the chain opened its first new prototype here Sept. 7 -- a 52,000-square-foot remodeled store with expanded perishables sections, including 30 feet of additional produce, European flower departments, a selection of European breads in a service and self-service mode, upgraded quality of meats in the delicatessen and Perdue chickens instead of a generic line for in-store roasting. The chain is also attempting to develop signature items, including a signature wine, Springer added. Kash n' Karry anticipates remodeling 10 more stores to conform to the new prototype by the end of its fiscal year in July, Springer said; it also plans to complete 25 minor remodels, which will include the new decor package but no new fixtures or department locations, he noted. Kash n' Karry is also being more aggressive in securing deals from vendors on more favorable terms, Springer said -- an effort reflected in an increase in gross profit as a percentage of sales to 20.8% for the year, compared with 20.6% a year ago, and for the quarter to 21.5%, compared with 20.9% last year. Those favorable terms have helped make it possible for Kash n' Karry to offer competitive wholesale prices to Gooding's, Springer said, "and it's possible the partnership with Gooding's will give us even more clout with vendors." According to Springer, Kash n' Karry initiated discussions with Gooding's last February "because we felt we could add real value to their operation." With the addition of the Gooding's business, Kash n' Karry's 65,000-square-foot distribution center here will be operating at about 98% of capacity, Springer said. "We've serviced up to 121 of our stores out of that facility, and as recently as a year and a half ago we were servicing 116 stores, and we've felt we could serve 135 stores from there." He said he doubted the chain will pursue other wholesale customers. "This was a unique situation where we felt we could add value in a market we don't serve," he explained. "And with all of the other major operators in Florida self-distributing, Gooding's was one of the few quality accounts in the market without its own facility." In response to a question, Springer said there have been no discussions with Gooding's about a possible acquisition of the chain by Kash n' Karry sometime in the future. Springer said Kash n' Karry has no plans to expand into the Orlando market "because it would be very expensive to move there due to the well-established competition."