Valu Food to close 7 sites Remaining stores will be revamped after declining sales

150 expected to lose jobs

November 14, 1998|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Two days after announcing a new focus on fresh and prepared foods as a way to revive sagging sales, independent grocer Valu Food said yesterday that it will close four of its 14 supermarkets and all three specialty grocery stores by the end of the month.

The struggling Baltimore-based chain, hurt by competition from larger food retailers and by mass discounters' growing share of food sales, will shut down stores in Bel Air, Rosedale, Perry Hall and Randallstown. The limited-assortment Tesoro stores, in Dundalk, Glen Burnie and on Perring Parkway, will go out of business as well, said Louis Denrich, Valu Food's president.

About 150 full-time and part-time employees will lose their jobs, though Denrich said he expects most who want to remain will be moved to other stores.

By closing underperforming stores, the chain can reposition itself with an emphasis on fresh produce and prepared meals, Denrich said. Valu Food joins a growing list of food retailers in Baltimore and across the country that have shifted focus to satisfy time-starved shoppers who want dinner prepared but who often seek better deals on nonperishables at Wal-Mart and Kmart.

"There's a lot of change going on in the industry, a barrage of competition coming in," Denrich said. "We had to look at some of our stores as not fitting into the new concept."

Valu Food expects to put its "fresh store" concept in place at its remaining 10 stores in Baltimore City and Baltimore, Howard, Anne Arundel and Cecil counties by spring, Denrich said. The process, started in several stores, will mean revamping layout, marketing, customer service and merchandise mix, in part by adding a prepared meals section and upgrading the delicatessen and meat departments.

In taking that route, Valu Food faces the challenge of a small chain trying to reinvent itself in a format that requires greater service execution and expertise. An added obstacle is Valu Food's financial trouble, which has been reportedly simmering for several months.

Some suppliers, who declined to be identified in the hopes of resuming business with the chain, said they have cut off supplies -- either permanently or temporarily -- or have demanded special payment arrangements.

"The pressures, particularly with suppliers either not shipping or putting on COD made the challenges significantly more difficult," said Jeff Metzger, publisher of the Columbia-based trade journal Food World. "It's tough enough to survive and prosper in this business in the best of times."

Other Valu Food vendors said it has been business as usual.

Supervalu Inc., a wholesale grocery supplier to Valu Food, has continued its arrangement, said Rita Simmer, spokeswoman for the Minneapolis-based company.

Steve Favazza, director of marketing for Schmidt Baking Co., said, "We are still serving Valu Food. We are being paid."

Denrich would not comment on arrangements with vendors, saying the company is renegotiating terms, payment and service levels with many. The company is also attempting to reduce its high inventory levels, which Denrich said would increase cash flow and help the company repay vendor debt.

In addition, a refinancing arrangement, the specifics of which Denrich said he could not release, would "pay for the transition and should alleviate problems going forward with vendors."

Denrich did not rule out the possibility of filing for bankruptcy protection under Chapter 11, which would give the company protection from creditors while reorganizing. He said, "In the strategic planning process, we had to evaluate all options and opportunities. We're going to do whatever it takes to secure our future."

Pub Date: 11/14/98

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