LONGS' 19 NEW STORE OPENINGS PROJECTED FOR FISCAL 1986 WILL PUT CHAIN OVER 200 STORE MARK; CHAIN ELONGATES GEOGRAPHIC POSITION WITH FIRST COLORADO OPENING

Longs' 19 new store openings planned for fiscal 1986 will put the West Coast chain over 200 stores, Longs said in its just released annual report for fiscal 1985 (ended Jan. 31). "Thirteen new stores were opened in fiscal 1985 bringing the total number in operation to 191," the annual report notes. "Approximately 19 new stores are planned for fiscal 1986." The chain added that "sixteen of these new stores are currently under construction including our first entries in Colorado." The 32 new store openings over the two year period is three more than Longs' management predicted at an analysts meeting in New York last May. The company indicated that its expansion program, which is part of a FY 1986 capital spending budget estimated at roughly $57 mil., is financed primarily from store operations. The firm carries no long or short term debt on its books. The fiscal 1986 capital spending target reflects an over 60% increase from the previous year when it spent $35.5 mil. Longs' management said at the May analysts meeting that 22 of the approximately 30 projected new store openings during fiscal years 1985 and 1986 would be in California and Arizona. With 10 store openings in California and three in Arizona occuring in fiscal 1985, at least half of the projected 19 store openings in the current fiscal year will be in those two states if the company's prediction last year holds true. Of the 191 outlets in operation at the end of January, 152 are in California, 16 in Hawaii, 14 in Arizona, six in Nevada, two in Alaska and one in Oregon. Longs' stores range in size from approximately 15,000 to 40,000 sq. ft., with the exception of three older and smaller stores. The chain noted that stores opening over the last five years have averaged approximately 26,000 sq. ft., "with about 65% being selling space." Average per store sales were $7.4 mil. in fiscal 1985. Longs' sales in fiscal 1985 were just under $1.38 bil. for 53 weeks. Restated for a 52 week period, Long's sales were approximately $1.35 bil., up 11.1%. While reported net earnings were $40.1 mil. -- adjusted for the extra week in fiscal 1985, Longs' net income increased 8.1% to $39.3 mil. "Pharmaceuticals and health related merchandise account for more than 20% of Longs' total sales," the annual report notes, or at least $260 mil. in FY 1985. Longs embraces a decentralized management philosophy in which store managers and district managers "act as entrepreneurs and are responsible for the day-to-day management of our autonomous stores," the annual report observes. This philosophy is reflected in the company's use of three large redistribution centers which provide economies of scale while preserving individual store autonomy. Through this system, Longs said, individual stores can make purchases based on their needs. The firm noted that 15% of its total purchases were handled through its redistribution centers in fiscal 1985 -- up from 11% the previous year. Longs indicated that it is currently installing computers in its stores at the rate of two per week and expects "all stores" to be on line by mid 1986. While the principal application of the instore computers is prescription processing, the company reported that it is looking into other applications, including inter-office mail. By March, 75 stores had been outfitted with computers. In response to the accelerated consolidation going on in the chain drug industry, and possibly spurred by the recent unfriendly takeover attempt of Hook by Rite Aid, Longs' proxy for its upcoming shareholder meeting includes several antitakeover provisions. The Longs' proposal includes the creation of a Maryland holding company, of which the drug chain will be a subsidiary; provisions for a staggered board of directors; and restrictions on transactions between directors and shareholders with more than 10% of Longs' voting stock. Fay's shareholders will vote for similar "fair price" provisions at the chain's upcoming annual meeting. Other chains with similar antitakeover provisions in their bylaws include Walgreens, Rite Aid, Perry and Jack Eckerd.