SUPERMARKETS : Vons Posts Tenfold Profit Gain in Fourth Quarter

Vons Cos., staging a strong recovery partly by cutting expenses and reducing debt, reported Tuesday that its profits increased nearly tenfold in the fourth quarter despite a slim gain in sales.

The company, the biggest supermarket chain in Southern California, said its net earnings surged to $29.7 million in the quarter, up from $3.0 million a year earlier. Sales, dampened by the closing of 10 stores over the past year and the weak economy, inched up 1.4% to $1.3 billion.

On the news, Vons’ stock rose to a new all-time high. In composite trading on the New York Stock Exchange, shares rose $2.75 to close at $29.

Vons lost money for a year after its August, 1988, $408-million acquisition of 162 Safeway supermarkets in Southern California and Nevada. It began posting profits again in the fourth quarter of 1989, and its earnings have climbed steadily as the company has closed weak stores, reduced buying and interest costs, consolidated administrative operations and integrated the two chains’ computer systems.

The Arcadia-based chain also benefited from tax benefits taken over the past year that stemmed from its previous losses. Still, even before taking one-time tax benefits into account, Vons’ profits were $17.7 million in the fourth quarter.

Its operating cash flow amounted to 5.2% of sales in the quarter about the industry average--and up from 3.3% a year earlier.

“Now that the Safeway stores have been consolidated (into Vons), they’re operating as one company and doing really well,” said Sheila O’Connell, an analyst with the investment firm Duff & Phelps in Chicago.

She said Vons’ fourth-quarter results demonstrate that the company has the cash flow to both continue reducing its burdensome debt and pay for remodelings and new stores. Over the past year, Vons’ debt was reduced by $73.4 million, to $728.5 million.

For all of 1990, Vons posted net income of $82.2 million, with the help of a one-time gain of $32.5 million from using tax benefits because of previous losses. The profit was a turnaround from the company’s 1989 loss of $25.1 million.

Sales last year increased 2.2% to $5.3 billion.

Vons, the nation’s 10th-largest supermarket chain, operates 320 stores under the names Vons, Pavilions, Pavilions Place and Tianguis. It also operates the Jerseymaid dairies and ice cream plant.