The future is now.
what many retailers seemed to be telling themselves in 1995 as they increased their capital budgets for new stores and remodels. The biggest spender this year was American Stores Co., Salt Lake City, which spent a whopping $750 million on capital projects -- the largest outlay in its history -- to open 81 new stores and complete 87 major remodels and 102 minor remodels. American said it will keep up the record-setting pace in 1996 by allocating $900 million to capital expenditures. Three other retailers who exhibited considerable optimism were Kroger Co., Albertson's and Safeway, each of which upped its capital expense budget during the year and committed itself to higher levels of spending in the next couple of years as well:
Kroger Co., Cincinnati, said it was raising its spending projections for the next three years to $1.96 billion from the $1.8 billion it had originally contemplated. The reason? The chain said it realized that the combination stores it opened in 1993 and 1994 were producing stronger returns than projected, regardless of the type of competition they were up against. So instead of committing $600 million a year to new stores and technology in 1995 and subsequent years, Kroger decided to spend a little more this year and to increase the allocations by even more in 1996 and 1997.
Albertson's, Boise, Idaho, said it was setting a goal of operating 1,000 stores by the year 2000 and would invest $3.4 billion in capital projects through 1999 -- including about $550 million this year, instead of the $2.6 billion it had projected a year earlier to achieve that goal. Albertson's, which operates 742 stores, said it would allocate the extra money to increase the number of store openings in each year through 1999. The company also disclosed plans to increase the number of store remodelings over the same five-year period and to build a new distribution center in Houston in 1996 -- only a year after its entry into that market.
Safeway, Oakland, Calif., began the year planning to spend $425 million on capital expenditures, then pushed the number up to $450 million and ultimately spent about $475 million to open 30 new stores and complete more than 100 remodels. The new stores it opened were slightly smaller than its prior prototype -- 55,000 square feet instead of 62,000 square feet -- because the chain said it has been able to achieve the same sales per square foot through the smaller, more efficient units. Other chains that pursued aggressive capital expenditures programs during 1995 included the following:
Fred Meyer Inc., Portland, Ore., which committed $225 million to capital expenditures in 1995 as part of an aggressive five-year expansion plan that followed the end of a series of labor strikes that lasted 88 days in 1994. The company said it expects to open 30 to 35 new stores and to complete 35 to 40 remodels over a five-year period.
Penn Traffic Co., Syracuse, N.Y., which invested $150 million in capital spending, or 4.5% of sales, during 1995 to add nearly 8% of additional selling space and to renovate about 20% of existing space. However, the company said it would reduce capital expenditures in 1996 to $80 million from the $100 million it originally targeted -- to
increase square footage by 3% to 4% -- in an effort to improve the performance of its existing stores.
Pathmark Stores, Woodbridge, N.J., which increased spending to $110 million in 1995 -- close to 3% of sales, compared with 2.25% in 1994 and 1.5% to 1.8% in the late 1980s -- as it began rolling out its perishables-oriented Pathmark 2000 units. With close to 50 of its 142 stores operating under the 2000 format by the end of 1995, Pathmark said it contemplates adding 20 more in 1996 and another 20 in 1997.
Weis Markets, Sunbury, Pa., which invested $105 million in capital spending in 1995 to fund what officials there said was the most dramatic growth program in its 83-year history. The expansion, featuring a new prototype of 50,000 to 60,000 square feet instead of 40,000 to 45,000 square feet and with 3,000 additional stockkeeping units per store -- resulted in nine new units and nine remodels in 1995, with 12 to 15 new stores and 12 remodels scheduled for 1996.