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"MAJORITY" OF KROGER NEW FOOD STORE OPENINGS IN 1985 WILL BE FOOD/DRUG COMBOS; SUPERx GROWTH IN 1984 TIED TO CUSTOMER ACCEPTANCE OF COMBO CONCEPT

Executive Summary

The "majority" of Kroger's projected new food store openings in 1985 will be combination food/drug units, the grocery chain noted in its annual report for 1984. Because one of its priorities is improved assets performance, Kroger said that in FY 1985 its capital spending "again will be modest -- approximately $300 mil." But the firm said that most of the planned 48 new food stores, averaging 47,000 square feet in floor space, "will be combination food/drug stores." Kroger's capital spending will be increasingly weighted toward food/drug combination units because they generate higher profits than non-combo stores, the company indicated. Kroger said that "our experience with combination food and drug store formats, virtually all of which have been opened in the past six years, is encouraging. Because of their size, the variety of products available and their emphasis on in-store service, combination stores can generate much higher sales and profits. As a result, they are taking an ever larger portion of our capital budget." The combo concept is also being carried over into Kroger's chain drug business, SupeRx, which "demonstrated healthy growth" in 1984. SupeRx volume was up 8.8% last year to $859.9 mil., the company noted. Kroger explained in the report that SupeRx sales "were spurred by growing customer acceptance of SupeRx's drug-convenience store concept. SupeRx is adding a limited assortment of convenience foods to its larger stores, while in its new facilities and in remodels, as many as 1,000 grocery and perishable items are being offered in addition to the typical drug store selection." SupeRx "plans to open 24 facilities in 1985 and remodel about the same number of existing stores," Kroger noted. Last February, Kroger moved to increase its chain drug business with an agreement to purchase the Indianapolis-based Hook drug chain in a $161 mil. cash/stock deal ("The Pink Sheet" Feb. 18, p. 12). On April 24, Hook shareholders approved the merger, which adds Hook's 330 outlets in the Indiana/Ohio area to the Kroger business. Hook's 1984 sales were projected to be in the $350 mil. range, putting combined sales at about $1.2 bil., about 7.5% of Kroger's $16 bil. 1984 corporate volume. At the end of 1984 there were 618 SupeRx stores operating in 20 states in the Midwest, Southeast and Southwest.
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