Price Co. Plans to Add 10 Stores Despite Recession

Undaunted by a sluggish economy and intensifying competition, Price Co. executives told shareholders Wednesday that the parent of the Price Club membership warehouse chain is accelerating its expansion program.

The feverish expansion pace is quite a departure from Price’s previous strategy of extremely cautious growth. But, in an interview after the annual meeting, Chairman Robert Price said he should have implemented the fast-growth strategy earlier.

“I think we would been better off doing more five years ago,” he said.

Price Co. opened eight new Price Clubs during its first fiscal quarter ended Dec. 22, bringing the total to 77. The chain plans to open as many as 10 more stores by the Aug. 31 end of the fiscal year, including warehouses in four new markets: Philadelphia, Dallas, Houston and Mexico City.

It also plans to open at least two new stores in the Chicago area next fall and as many as six more outlets in Canada by the end of this year. All told, the close of 1992 could find Price with 100 stores, double what it has less than three years before.

Although Price founder Sol Price (Robert’s father) pioneered the discount warehouse concept in 1976, the company generally remained in the Southwest, leaving it to clone chains such as Costco Wholesale and Pace Membership to establish presences in other high-growth markets.

Now that Price has seen the errors of its cautious approach, those competitors are solidly entrenched in the markets Price is now entering. Doubts on Wall Street as to how successful Price will be with its expansion, given economic conditions and the competition, were mentioned Wednesday by one Price executive as an explanation for the company’s falling stock price.

Price shares are trading in the $47 range over the counter after selling as high as $65.25 over the past year.

The company recently reported a first-quarter profit of $50.3 million on revenue of $2.45 billion, compared with a profit of $47 million on revenue of $2.16 billion over the same three months the previous year.

Price told shareholders that profits are not growing as fast as its revenues partly because of high start-up costs related to the new stores and partly because of thinner margins caused by the company’s desire to quickly sell seasonal inventory.

Profit growth also slowed over fiscal 1991 ended Aug. 31. For the year, Price’s net income was $134.1 million on revenue of $6.6 billion, contrasted with a profit of $125.4 million on revenue of $5.3 billion in fiscal 1990.