ShopKo discloses IPO expectations - Super Valu Stores Inc. ShopKo Stores Inc., investment public offerings

Discount Store News, Sept 2, 1991

ShopKo Discloses IPO Expectations

GREEN BAY, Wis. - Super Valu expects that a 52% stake in its ShopKo discount store subsidiary will fetch as much as $280.5 million.

The supermarket operator has followed through on its announced intentions to take ShopKo public by filing a stock registration with the Securities and Exchange Commission to sell 16.5 million shares of ShopKo stock at an expected price of $14 to $17 a share.

Under terms of a June 1991 recapitalization, ShopKo wouldn't get to keep the proceeds, if the IPO goes through. Instead, it would have to remit the money to its parent to repay an undisclosed portion of a $427.5 million demand note signed in anticipation of going public.

Accordingly, Super Valu, rather than ShopKo, would get to use the proceeds of the stock sale for its own needs, such as store expansion.

ShopKo owns all the stock to be offered, and Super Valu will retain as much as a 48% or as little as a 41% stake. The percentage depends on whether underwriters exercise an option to buy 2.5 million additional shares that Super Valu owns. Either way, it will continue to control the chain. Goldman, Sachs, New York is the lead underwriter.

The ShopKo subsidiary operates 108 discount stores in the upper Midwest and the Mountain and Pacific Northwest, and Super Valu owns two Twin Valu hypermarkets in Ohio. Super Valu retains ownership of Twin Valu under the ShopKo IPO.

Sale of the ShopKo stock could take place by Oct. 15.

ShopKo stores averaged $15.2 million in sales in fiscal 1991, notes the SEC registration, while sales per gross square foot averaged $178. Sales averaged $222 a square foot of selling floor space. ShopKo stores average 87,172 square feet, with average storage space of 9,066.

ShopKo expects that the $36 million expansion of its three distribution centers over the next 12 months will enable it to reduce store storage space to levels of its competitors. The chain will unveil a new prototype in mid-November: a 120,000-square-foot relocated store in Green Bay.

In October, it will show off its new look when it opens its first store in Salt Lake City, Utah. The two openings will complete a seven-store expansion for 1991 of five new and two relocated units.

In 1992, ShopKo plans to open two new stores, including a new prototype store of 110,000 square feet in Salem, Ore., and to relocate one more. in 1993, ShopKo plans six new stores, including one relocated unit.

Shopko units stock about 74,000 skus, the document discloses. Pharmacies and optical centers, operating in all but a handful of stores, generated 14.7% of ShopKo's sales, soft lines provided 28.8%, while hard lines accounted for 56.5% of sales in 1990.

ShopKo operates under a promotional pricing policy, without necessarily being the lowest-priced on every item. Last year, promotional items accounted for 30% of sales.

In the fiscal year ended Feb. 23, 1991, ShopKo earned $39.1 million in operating profits on sales of $1.52 billion. It ended the year with 104 units. Same store sales rose 1.4%. As a percentage of sales, net profits held at 3% over the past three years, but dipped to 2.3% for the first half of 1991.

When ShopKo goes public, $281 million in retained earnings will disappear from the equity side of its balance sheet, presumably remitted to its parent, and be replaced by $283.9 million more in additional paid in capital from the stock offering, the registration shows.