BELLEVUE, Wash. -- Quality Food Centers here completed its acquisition last week of Hughes Family Markets, Irwindale, Calif., for approximately $358.8 million in cash, moving QFC outside its Puget Sound base of operations for the first time.
The 56-store Hughes chain accounts for sales of approximately $1.25 billion, or about 5% of southern California's market share. Added to QFC's sales base of $800 million for 64 stores in Washington, the company's total sales will be approximately $2.05 billion.
QFC management said it regards the Hughes acquisition as "the first step in the company's plans to become a leading multiregional operator of premium supermarkets. Management believes there are a number of attractive acquisition opportunities in desirable growth areas" all across the United States.
According to a prospectus issued in conjunction with the Hughes transaction, QFC said it hopes to expand from its base in western Washington into eastern Washington and Portland, Ore., and "[it] will seek to implement this [in-market growth] strategy in its new southern California market as well."
QFC said its strategic objective is to become "a leading multiregional operator of premium supermarkets . . . [in order] to continue to achieve its goal of controlled and profitable growth."
Toward that end, the company said in the prospectus that it plans to capitalize on its acquisitions through several means:
By increasing sales and enhancing margins in existing and newly acquired stores by emphasizing higher margin specialty and convenience items, including prepared foods and home-meal replacement items.
By expanding sales of private-label brands using a program it is implementing in its Washington stores, which has increased private-label sales from 3% to approximately 8.5% during 1996.
By maintaining a high-quality store base, including selective remodels among the Hughes group to enhance the presentation and merchandising of meat, seafood, delicatessen and other perishables and to add or enhance full-service and leased specialty departments.
The prospectus said QFC expects Hughes to benefit from these programs, while QFC expects to benefit from Hughes' expertise in such areas as purchasing, distribution and category management; QFC also said it expects to benefit from increased capacity at Hughes' distribution center.
Pegging the Incentives
Procter & Gamble's Logistics Development Incentive is calculated to compensate retailers for historical average levels of unsalable products, delivery exception and markdown product costs. Those levels have varied significantly by class of trade.