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Ralphs Expected to Cut Grocery Prices

Retail: The permanent markdowns are aimed at countering gains by rival chains.


Countering gains made by rival supermarket chains, Ralphs Grocery Co. plans to announce today that it is cutting prices on most items on its shelves.

Chief Executive George Golleher said Wednesday that Ralphs, the largest supermarket chain in Southern California, is permanently marking down thousands of items in its 266 stores.

"Southern California has one of the most competitive [supermarket] environments in the nation," Golleher said. "The Southern California market will continue to be very competitive."

Industry analysts said Ralphs' prices are higher than its two main rivals, Vons and Lucky, and the price cuts are designed to help Ralphs shore up sales.

The move could prompt other supermarket chains to compete more aggressively on price, industry analysts said.

"If Ralphs picks up additional market share as a result of this, you will see more aggressive pricing in this market generally," said Jonathan Ziegler, a San Francisco-based analyst with Salomon Bros.

But analysts said supermarket chains would try to avoid deep discounts that would threaten profits.

"I don't think they want to get into a price war," said Andrew Berg, an analyst at Bear Stearns in New York.

Sales at Vons, the second-largest chain, have been up significantly in recent months. The Arcadia-based company said its same-store sales--revenue from stores open at least one year--jumped 7.1% during its second quarter ended June 16. Same-store sales at Ralphs, a privately held company based in Compton, rose just 2.4% during the same period.

Industry analysts said sales have also been rising at No. 3 Lucky. Lucky is owned by Salt Lake City-based American Stores, which does not release financial results of its units.

Analysts also said Ralphs' share of the Southland market has dropped slightly in recent months. Ralphs has 28% of the market share in the five-county area, followed by Vons at 25% and Lucky at 22%, according to the latest estimates.

Ralphs, however, says the company appears to be gaining market share as it consolidates operations. It says layoffs of 800 part-time workers and consolidation of its distribution operations in the last year have enabled it pass on lower prices to consumers.

Also contending for shares of the expanding Southern California market are Stater Bros., Albertson's and Hughes.

Three other chains--Smart & Final, Costco/Price Club and Food 4 Less--compete for discount customers. Ralphs owns the 78-store Food 4 Less chain, which is not affected by the price-cutting program. On the other hand, Gelson's, Bristol Farms and Pavilions vie for more upscale customers.

Pavilion's, a 34-store chain, is owned by the Vons Cos. An additional 295 stores are operated under the Vons name.

Vons had no comment on Ralphs' price-cutting campaign.

San Leandro-based Lucky, which has 245 stores in Southern California, does not plan to change its marketing plans, said spokeswoman Judy Decker.

"There are shifting prices at the other chains," Decker said. "Lucky's focus has been low price for 30 years and that will continue."

The prices of some Lucky and Vons items will be cited by Ralphs in promotions for its price-cut program.

Most supermarket chains engage in price-comparison advertising from time to time, but such comparisons are not a good indicator of overall value, said Betsy Cotton, a San Francisco-based spokeswoman for CalPIRG, an advocate group for consumers and the environment.

"Ralphs is trying to attract the attention of consumers who haven't been shopping at their stores," Cotton said. "A price comparison is a marketing technique, but it's good for consumers because they can benefit if the comparisons involve products they want."

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