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NORTHWESTERN TO ADD DO-IT-YOURSELF ITEMS

Executive Summary

NORTHWESTERN TO ADD DO-IT-YOURSELF ITEMS for Pay'n Save's Ernst home center division as well as its drug outlets, the chain says in its just-released annual report for the year ended Jan. 28. According to the report, Northwestern is expected to "become an important supplier to the Ernst home center stores." Ernst has 69 stores in six states and was the major contributor to Pay'n Save's $321.3 mil. home center sales in fiscal 1984. The decision to involve Northwestern in the do-it-yourself distribution business further indicates the degree of Pay'n Save's vertical integration plans for the whslr. It also means that Pay'n Save will have a broader range of merchandise for large independent or chain customers in the Northwest market. The chain said it paid "approximately $3 mil." in cash for Northwestern. The Pay'n Save annual report also discloses financial figures that give an indication of Northwestern's financial condition at the time of its purchase by Pay'n Save in February. Northwestern was coming off a stagnant period prior to the Pay'n Save acquisition. The whslr.'s 12-month sales for the period ending Jan. 28, 1984 were $111.6 mil., which was level with its sales performance in the preceding 12-month period. In the 12 months ended Jan. 28, 1983, the firm had sales of $111.5 mil. Northwestern's earnings, however, were under pressure: while the firm earned $507,000 after-tax two years ago, in the most recent 12-month period it showed a $604,000 loss. Pay'n Save's drug store business experienced an 11% increase in sales in the most recent fiscal year. Its 111 Pay'n Save and 32 Bi-Mart stores reported 1984 sales of $718.1 mil. v. $646.5 mil. in 1983. The company estimates that "approximately 9% of the sales increase was attributable to improved sales in existing stores with the remaining 2% resulting from new stores." Pay'n Save plans to open three new stores in western Washington during fiscal 1985 and to expand facilities at one Alaskan store. In addition, the company expects to open two Bi-Mart stores in the coming year. The chain intends to install scanning systems capable of reading mfr. bar codes in 12 Seattle stores in the coming year. The company's decision is based on a pilot test of a slot scanning system similar to ones used in grocery stores in one of its Seattle stores. In addition to providing faster and more accurate checkouts, Pay'n Save said the scanners can "capture merchandise movement information which will support the division's ongoing merchandise planning efforts." Pay'n Save plans to open two new "Price Savers Wholesale Clubs" in Washington by the end of summer. The two will join Pay'n Save's first such club that opened in Salt Lake City in March to form a "chain of cash and carry wholesale warehouses catering to small businesses and members of selected groups." The warehouses will carry an extensive range of products, from major appliances to groceries, and from office supplies and equipment to health and beauty aids. The warehouses' primary customers are expected to be small businesses, who will be charged an annual fee, but memberships will also be offered to members of groups such as credit unions, employees of hospitals, public utilities, financial institutions and govt.

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