K mart grand opening bright spot in gloomy year - store opening in Phillipsburg, New Jersey

Discount Store News, Oct 16, 1989 by Richard C. Halverson

Kmart Grand Opening Bright Spot in Gloomy Year

PHILLIPSBURG, N.J. - Coming on the heels of disappointing second quarter results, the crowds that thronged the grand opening of a new K mart here last month must have been a welcome bit of news in Troy, Mich.

The store, which celebrated its grand opening Sept. 24, originally was slated to be a Bradlees before that chain pulled in its horns last fall following the leveraged buyout of its Stop & Shop parent. At 82,905 square feet, the K mart in the new Phillipsburg Mall runs a bit smaller than the new full-size prototype of 86,479 square feet.

K mart is to be one of four co-anchors of the new regional mall. Sears and Hess's, a regional department store chain, also held grand openings on the same day, adding to the traffic congestion that jammed the parking lots. JCPenney will open the fourth co-anchor next spring.

The Phillipsburg unit is one of 70 stores the Troy, Mich.-based discounter will open during this year. Of those stores, 16 are relocations, for a net increase of 54 to a year-end total of 2,145 U.S. and Puerto Rican stores.

Next year will see another step up in K mart's expansion program. K mart has set a goal of 2,500 stores for the 1990s and plans to open 100 a year, starting in 1990, until it reaches that goal.

The 1989 expansion is the first annual program that exceeded the 1983 figure of 68 new stores. Expansion fell to 21 units in 1984 and sank to a low for the decade of 18 in 1985. In 1986 new store openings rose to 38 but then dipped to 36 in 1987, before rising again to 63 in 1988, of which 17 were relocations, for a net gain of 46 stores.

The Phillipsburg K mart brings competition to Laneco, a regional chain of combo grocery and general merchandise stores, which operates the only other discount store in the area.

The crowds that flocked to the new K mart almost proved to be too much of a good thing. One would-be shopper complained to district manager Joseph A. Palko that she had put back all her intended purchases because she got tired of waiting in a line that failed to move because of a lengthy delay in getting a credit card approved.

Other would-be shoppers proved less considerate, and Palko was kept busy picking up merchandise that customers had ditched on endcaps next to the 10 checkouts.

Nonetheless, customers appeared to be in a buying mood and particularly headed for the display of $200 designer watches, on sale at $29.96, compared with $49.96 everyday. The watch display had its own register.

Other shoppers jammed an aisle that featured Halloween costumes.

Because of a heavy incidence of home ownership in the market area, the Lehigh Valley (Pennsylvania) market, the new K mart puts extra emphasis on lawn and garden, including an expanded selection of green goods, and home center, Palko said.

In patio, K mart was offering mums in six-inch pots for $2.50, against $4.44 everyday. On a blue light special, mums went for $1.97. Hibiscus in 10-inch pots were on sale for $8.87.

In its limited home center department, (no lumber, floor and ceiling tiles, and other such merchandise), the new K mart is carrying Glidden paint everyday at $10.94 a gallon and Dutch Boy at $8.94.

The store also carries unfinished kitchen cabinets at $35.97, on ad, for a two-door base section. Customers usually install them in laundry rooms and basements, rather than kitchens, Palko said. Normally only K marts with expanded home centers carry unfinished cabinets, "but we carry them because they sell," Palko said.

In automotives, K mart has very sharp prices for oils and anti-freeze. The everyday price for top brand oils is 99 cents a quart, he said. That compared with $1.17 at Laneco. For Prestone anti-freeze, the everyday price is $7.77, compared with $9.98 at Laneco.

Over the past year, K mart has cut prices on 8,000 items in order to maintain the same relative spread, including 5,000 since this spring when Sears instituted its everyday low price policy, a K mart manager said.

But that price shaving could be affecting profits, with second quarter earnings slipping 10.9 percent, while sales rising 4.8 percent. Same store sales gained 1.5 percent.

Moreover the SG&A ratio for K mart crept up to 23.3 percent in the second quarter from 23.1 percent a year earlier, estimated Bernard Sosnick, retail analyst for the Deutsche Bank Group.

That reversed a four-year pattern of improved S&GA ratios for the second quarter, Sosnick said in a September report. The S&GA ratio fell from a 1985 high of 25.0 percent to 23.6 percent in 1986 and dipped to 23.3 percent in the second quarter of 1987 and further to 23.1 percent in the same period last year.

Second quarter sales rose to $7.01 billion in 1989 from $6.68 billion a year earlier. Net income declined, however, to $145 million from $162.8 million in the second quarter of 1988, K mart reported.