Price refining operations; hits snag on east sites - The Price Club

Discount Store News, Jan 21, 1991

Price Refining Operations; Hits Snag on East Sites

SAN DIEGO -- The Price Club continues to refine its operations, considered the model for other membership warehouses, while also sustaining setbacks in a few endeavors.

Unlike other membership warehouses, the company also has labor contracts covering its stores in five states--California (29 stores), Maryland (five), New York (three), New Jersey (two), and Connecticut (one) and some are expiring next month. Price Club hasn't ever had a strike or lockout.

On the positive side, the Price Club has:

* Launched a Special Events program, featuring expanded lines of merchandise and special items. The first such program was held in conjunction with the opening of Price Club's first two stores in Colorado in the Denver suburbs of Aurora and Westminster. These featured diamonds, fine jewelry, pianos and organs. * Revised its delivery service for its four San Diego area stores, Chula Vista, Santee, San Diego (Morena Boulevard) and Southeast San Diego. Delivery charges have been lowered for the office products, cleaning supplies and food-service goods covered by the program, with no charge on orders of $300 and over and a $15 fee for orders under $300. * Expanded Price Club Industries, the diversified operation that provides a variety of specialized services to hold down members' costs. PCI's aegis includes central photo processing, one-hour developing in many stores, a central optical laboratory, optical services in most clubs, a ground meat packaging plant and packaging of some food items.

The two main setbacks were:

* Shutting the two free-standing Price Club Furnishing home and office furniture stores. While the units in San Juan Capistrano and Santee, Calif., had greater than anticipated losses, merchandising and display insights garnered from the stores were incorporated in a test 1,750-square-foot home furnishing section in its Fountain Valley, Calif., club. Aspects of that program are being integrated into other units. * Failing to purchase the sites for the previously announced clubs planned for Rockland County, New York and Philadelphia. The units were part of Price Club's drive to expand its presence in the Northeast that is now limited to the total of six clubs in New York, New Jersey and Connecticut.

The company plans to step up its expansion program to keep pace with other membership warehouses, with the focus on new stores in "the Western states and along the Eastern seaboard," according to Price Club's 10-K filing.

But the company may have missed out on the other growth mode noted in the report, "expand[ing] to regions where it doesn't presently have warehouses, either directly or through acquisitions, organization of majority-owned subsidiaries, joint ventures, or otherwise."

The industry's two major acquisitions last year were by rivals, Sam's Wholesale Club, which garnered the Wholesale Club, and Pace Membership Warehouse, which purchased Price Savers.

The only remaining major wholesale club that could be acquired is BJ's Wholesale Club, now part of Waban Inc. Price Club had held acquisition discussion when the now-defunct Zayre Corp. owned BJ's. BJ's is currently the dominant club in the Northeast with 22 stores in the region.

As for Price Club's union contracts with the International Brotherhood of Teamsters, the agreement covering the East Coast stores expires Feb. 14; the one for California, Feb. 7, 1992. The company termed its labor relations "excellent" in its 10-K filing.