American Stores
Company Today

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AMERICAN STORES COMPANY TODAY

In 1993, management determined that the Company needed to change from a holding company orientation to an operating company approach. Such a change would enable the Company to take advantage of its size, attain consolidated synergy among its operations and better position the Company to succeed in an increasingly competitive industry.

To guide the Company in this effort, management developed the Six Point Plan for Growth that outlined the critical success factors needed in order to achieve sustained growth and profitability. These are:

  1. The Company must hold leading positions (#1 or #2) in attractive markets.
  2. The store base must be modern.
  3. Merchandising must be responsive to the lifestyles of today's customer.
  4. Technology must be state-of-the-art.
  5. The organizational structure must be effective and provide economies of scale.
  6. The cost structure must be among the lowest in the industry.

In accordance with the Six Point Plan, the Company has initiated strategies designed to enable the Company to take advantage of its size, attain consolidated synergy among its operations, and address customer needs at a local level.

The Company's operations are generally located in major metropolitan markets where they hold leading market positions. Major markets include Philadelphia, Chicago, San Jose, Oakland, Sacramento, San Francisco, San Diego, Orange County, Riverside/San Bernardino, Los Angeles (where the Company is third in overall market share), Las Vegas, Albuquerque, Kansas City, Phoenix, Indianapolis, Omaha, Des Moines, Milwaukee and Boston.

The Company selectively disposed of divisions or groups of stores from 1990 to 1995 that did not fit into the overall market strategy. These were generally weaker performing units in markets where the Company was not a leader. The Company's food and drug store operations now hold leading market shares and are now generally number one or two in each of their core market areas. The Company works to maintain and expand its strong market positions by significantly investing in core market areas. Merchandising in the Company's food stores is designed to meet the needs of the consumer. Most new food stores are large, 65,000 square foot combination food/drug stores with an emphasis on perishables and service departments such as produce, floral, meat, seafood, deli, bakery and prepared foods. The combination stores also include a full drug store product assortment as well as services such as banking and video rental.

The Company's drug stores are designed to allow convenient shopping and prescription pick up. The Company operates over 1,100 pharmacies in its stores and filled approximately 80 million prescriptions in 1997. The drug stores offer a wide assortment of general merchandise, health and beauty aids, over-the-counter medication, greeting cards and photo processing. The Company's new drug stores are typically free-standing corner locations and many offer a drive-up pharmacy window.

American Stores Company is presently the only major food and drug retailer that operates supermarkets, combination stores and stand-alone drug stores. By leveraging the combined food and drug retail presence, the Company derives many benefits. Deeper market penetration is attained in combination stores by having separate food and drug identities. Food customers cross over to the drug side and vice-versa. Synergies are generated in marketing, merchandising, procurement, distribution and technology. By having pharmacies in many of the food stores, the pharmacy network is expanded beyond the stand-alone drug stores, making the Company more competitive in attaining third-party business. In addition, the supermarket pharmacies are more effective because they incorporate the expertise from the drug stores.

The Company's headquarters are located in Salt Lake City, Utah. The infrastructure and support network of American Stores is centrally managed. Procurement, inventory management, real estate, information technology, finance and human resources functions have been consolidated in Salt Lake City and support all of the Company's food and drug operations. The Company is also in the process of building a centralized marketing group. Each of the operating divisions maintains its own local operations management.

The Company is investing heavily for the future. It has spent over $1 billion for new stores, support structures, and information systems in each of the last two years. The Company has an aggressive growth program with plans to open 70 to 80 stores per year, as well as remodel another 80 to 90 stores per year going forward.

With modern, attractive stores in growing markets supported by an efficient distribution and support organization, the Company believes it is positioned well to succeed in the years ahead.



(1) Excludes the square footage of the drug side of 190 combination stores.

(2) Includes the square footage of the drug side of 190 combination stores.


STORE TYPES
Store Type Description
Supermarket Includes stores that sell groceries and a limited variety of general merchandise and expanded stores that offer service departments but do not satisfy the Combination store definition. The average grocery store is 33,300 total square feet.
Stand-alone Drug Stores that feature pharmacy service, health and beauty aids, cosmetics, greeting cards, camera centers, snack food and a variety of general merchandise items. The average drug store is 18,600 total square feet.
Food/Drug Combination Large, service-oriented stores that offer one-stop shopping with common check-out. These stores offer a full range of perishables departments, plus pharmacies, cosmetics, greeting cards and customer service centers. They range in size from 40,000 to 84,000 square feet. The average combination food/drug store is 59,600 total square feet.




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