ShopKo continues expansion, enters new markets - discount drugstore chain - Annual Industry Report, part 2

Discount Store News, July 18, 1988

ShopKo Continues Expansion, Enters New Markets

GREEN BAY, Wis.--ShopKo is set to enter yet another new market this year, while also looking to build on its $1.1 billion sales mark achieved in fiscal 1988.

Not only did sales reach the note-worthy level through a 17 percent increase, but operating earnings also escalated some 14 percent to $61 million, for the year ended Feb. 27, 1988.

ShopKo's results were considered to be of "stellar performance" by its parent company Minneapolis-based Super Valu. In fact, the parent company said in its annual report: "We're very pleased with ShopKo's achievements to date; they clearly warrant continued investment."

The 75-store chain is already slated by its parent to be the beneficiary of $152.2 million in capital investment during fiscal 1989--representing over 40 percent of Super Valu's total $377.5 million capital budget.

12 New Units This Year

Much of this capital contribution is being funneled toward ShopKo's plans to open 12 new stores this year.

Playing a major role in the growth will be a new Utah market. Slated for fall openings are four stores in Salt Lake City and one each in Layton, Ogden and Orem-Provo.

In its usual style, ShopKo is already starting to inundate its new market with publicity, by first playing up the number of local employees to be hired by the stores. And if the chain continues its typical advertising style, local papers, television and radio stations will be filled with an onslaught of ShopKo advertisements aimed directly at its new market just prior to the grand opening.

Here, as in all new markets, ShopKo has devoted extensive research into the region by looking at the consumers, competitors and economic outlook. "Marketing research also continues after the store is open, helping to insure we're in touch with consumers," said firm president William Tyrrell.

During the past year, ShopKo remodeled five stores, relocated one and added 10 new locations. New territories reached in fiscal 1988 included Nevada and the state of Washington.

As ShopKo moves further west it finds itself up against a major force in the Pacific Northwest--Fred Meyer. With new stores running twice the size of the average 93,000-square-foot ShopKo, Fred Meyer is a formidable competitor. However, ShopKo more closely resembles Target, which will also be making a bid for parts of the Pacific Northwest this year.

To help find its niche among the competition, ShopKo gives store managers the authority to customize the merchandise mix and promotions geared around the local needs of each community. "Once an area is deemed viable for growth and a store is built, ShopKo's decentralized management plays a critical role in the store's success," explained Tyrrell.

Keeping Pace with Industry Leaders

ShopKo is also keeping pace with the industry leaders by continuing to implement its point-of-sale scanner system. The chain expects all stores to be operating on the program by May of next year. Computerization has also made its way into ShopKo's in-store sign making, energy management and electronic mail.

While a streamlined inventory system and an automated distribution network have also been implemented by ShopKo, the chain is also concentrating on two growth areas within the store--pharmacy and optical.

The success of ShopKo's pharmacy--first started in 1972 and now in 68 stores--prompted the chain to open an optical department in '78. Expansion has placed optical in 59 stores.

Table : ShopKo

PHOTO : In 1987 ShopKo streamlined its inventory and automated replenishment systems. It is now concentrating on two growth areas--pharmacy and optical.