A TOOTHLESS WOLF ROAMS WALL STREET

The theme of this week's Page 1 news feature is supercenters, the format considered the wolf at the door of the conventional supermarket industry for a couple of years now.at conventional operators can fight back and survive the supercenter onslaught. Or, more precisely, it's probably that the shape of the threat is becoming better known. Perhaps more time will prove that supercenters have been transmuted

The theme of this week's Page 1 news feature is supercenters, the format considered the wolf at the door of the conventional supermarket industry for a couple of years now.

at conventional operators can fight back and survive the supercenter onslaught. Or, more precisely, it's probably that the shape of the threat is becoming better known. Perhaps more time will prove that supercenters have been transmuted into toothless wolves. But in the meanwhile, one intriguing question remains: What does Wall Street think about supercenters, and what will securities analysts say to investors about supermarkets' ability to survive in the new supercenter environment? And how will their advice affect supermarket share prices?

In recent days, SN hosted a securities-analysts roundtable discussion of industry issues, results of which will form the substance of next week's Page 1 news feature. But as for now, let's take a quick look at what these analysts told SN about supercenters, starting with a singular observation:

"I've looked at the 'Toys 'R' Us syndrome' and the supercenters. I say supercenters are probably the best thing that could have happened to the supermarket industry, in a way. This doesn't mean I dismiss supercenters; anytime you add square footage that is well managed to a market, it's obviously a negative, and deflationary. Why I liken [the situation] to Toys 'R' Us is that Toys 'R' Us had no competition, and it got real sloppy in its operation. "What the supercenters have done is force [the supermarket industry] to really develop the whole Efficient Consumer Response, which is driving the business.

"Coincident with that, because technology seems to be the magic word on the stock market, I sell [supermarket] stocks as being beneficiaries of applied technology." (Jonathan Ziegler, Salomon Bros.)

"The [conventional] industry has been almost impervious to alternate formats. Those worried about supercenters really haven't had anything to worry about. I've yet to see any material impact on any companies from supercenters, and I don't think you will." (Gary Giblen, Smith Barney)

"Supercenter operators, particularly Wal-Mart Stores, have their work cut out in metro markets. They have some very clear competitive disadvantages in the metro markets, which they haven't yet begun to test." (Ed Comeau, Donaldson, Lufkin & Jenrette)

"I think it's wrong to minimize the threat from supercenters. They [and other big-store operators] are taking smaller, less capitalized retailers to the cleaners over the medium term." (Mark Husson, J.P. Morgan)

"It's come down to a very intensely competitive environment. That's due in part to supercenters, but every single major company has picked up square footage. There are a lot of new stores and companies are learning how to run them better." (Debra Levin, Morgan Stanley)

So, it seems that if this sampling is a good indication, conventional chain operators should fare well on Wall Street when it comes to discussions about supercenter competition. Don't miss the broader discussion of industry issues, from the Wall Street point of view, in next week's SN.