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COMPETITIVE OPENINGS GROUND EAGLE

MILAN, Ill. -- Eagle Food Centers here has been battered by competitive openings for the last five quarters -- but the company has announced a big jump in capital expenditures as part of a plan to expand its market and sales volume.Chief Financial Officer Pat Plumley told the annual shareholders meeting here that sales were down 4.7% in fiscal 1997 to $967.1 million. Same-store sales declined 5.2%.

MILAN, Ill. -- Eagle Food Centers here has been battered by competitive openings for the last five quarters -- but the company has announced a big jump in capital expenditures as part of a plan to expand its market and sales volume.

Chief Financial Officer Pat Plumley told the annual shareholders meeting here that sales were down 4.7% in fiscal 1997 to $967.1 million. Same-store sales declined 5.2%. Core stores (defined as stores open for more than one year without a change in competition) were down about 2.1% for the year.

Plumley told shareholders the company faced 17 competitive openings that affected 26 Eagle stores in the fiscal year.

In addition, "gross margins came under pressure during the second half of the year as we increased our promotional activity in response to competitive store openings and other competitive activity," Plumley said.

Plumley said the first quarter of 1998 was also a difficult one, characterized by five additional competitive openings affecting nine Eagle stores. For the quarter, total sales declined 3.5% and same-store sales were down 3.1%. Core store sales were down 0.5% in the quarter.

Company officials hope to reclaim sales with a $65 million capital expenditure program this year -- a sum which is up dramatically from $19.6 million last year, $12.8 million in fiscal 1996 and $4 million in fiscal 1995.

The aggressive plan will be funded primarily from internally generated cash flows, sale/leaseback transactions and short-term borrowings from the revolving credit facility, officials said.

"The company is pursuing a more aggressive store development program to identify markets for new stores and obtain the best potential new store locations available in any target market for openings over the next two to five years," said Bob Kelley, Eagle chairman and chief executive officer, in the company's annual report. "Management intends to focus the company's new store development within existing markets or new markets within a 300 mile radius of its headquarters and central distribution facility in Milan, Ill."

Kelly said the company also anticipates operating performance improvements from the newly implemented operating and merchandising systems that link the Milan [Illinois] support center to individual stores. These systems streamline many Eagle operations, including ordering and inventory, pricing, receiving, deliveries, accounting, scheduling and payroll processes.

"To further boost awareness of the changes happening at Eagle, we have launched a new marketing plan for 1998...to increase awareness of Eagle Food Centers, generate more traffic at all store locations and increase same-store sales," Kelly said. "Our theme is 'Keeping an Eagle Eye on Things,' and it is the cornerstone of an aggressive advertising program for radio and television that has quadrupled the frequency of broadcast compared to past Eagle advertising campaigns."