Unable to capture the market share it wanted, Smith's Food & Drug Centers Inc. is forsaking Southern California after its second unsuccessful venture into the Golden State. But the grocery chain is looking to expand in Arizona by negotiating to buy another grocery chain there.
The two announcements made Monday reflect two separate and unrelated corporate efforts, according to spokeswoman Shelley Thomas."The first venture there (California) was an acquisition where we inherited other stores," Thomas said. "This was an entry with our own stores and our own store concept. Unfortunately, we timed it with the onset of a recession and a very difficult competitive market."
Eighteen Smith's stores in Southern California already have been sold or leased to four other grocery companies. The remaining 16 Smith's stores will be closed soon, and corporate officials anticipate these will be sold or leased to other retail firms. The 34 California stores produced sales of about $675 million in 1995.
The change will cost about $85 million in restructuring charges that will be applied against earnings.
"We believe our shareholders would be better served by redeploying their assets to further develop Smith's other profitable regions," said Jeff Smith, the company's president and CEO.
The firm currently operates 120 stores in Utah, Arizona, Nevada, Idaho, New Mexico, Wyoming and Texas.
Smith's opened its first California store in Oxnard in 1991. Following that, the chain opened 33 more stores ranging from Bakersfield in the north to El Cajon in the south. The company in 1993 also built a 1 million-square-foot distribution and dairy center in Riverside that was intended to supply 100 stores. However, that center operated at only one-third its capacity and in November 1995, was leased to Ralphs Grocery Co.
That month, Smith's officials also announced they were "considering various options" for leaving the California market.
Meanwhile, negotiations currently are in full swing to possibly buy Smitty's Super Valu Inc., a 28-store regional grocery operation with stores in the Phoenix and Tucson areas.
No financial terms have been disclosed, and Smith's officials emphasized that no agreement has been reached.