Vons to Lay Off 250 Workers, Close 11 Stores to Cut Prices : Restructuring: The Southland’s largest grocery chain is seeking to regain lost ground in a highly competitive market.

Faced with dramatically declining sales, Vons Cos. on Tuesday unveiled a restructuring plan that calls for laying off 250 administrative workers and closing 11 poorly performing supermarkets to create savings that can be used to cut prices.

Vons, the Southland’s largest supermarket chain, plans to lay off about 15% of its administrative work force in Arcadia, reduce executive salaries and establish more sales promotions in a bid to regain lost ground in the highly competitive Southland market.

Vons, which operates Vons, Pavilions, Tianguis and Expo stores in the Southland, has not announced the sites of the store closings, but the company said it plans to close six this year and five in 1994. Of the 11 stores to be closed, all will be Vons or Pavilions stores, it said. The job cuts at Vons’ headquarters will affect clerical workers, support staff and some department heads.

The supermarket chain is proceeding with its plan to build up to 12 stores in underserved, neglected parts of the Los Angeles area, company spokeswoman Mary McAboy said.

The restructuring plan was announced the same day Vons reported a third-quarter loss of $20.9 million. That contrasts with a profit of $22.3 million for the same period a year ago. The third-quarter results include a onetime charge of $56.9 million for the restructuring costs, which include the costs of severance pay and store closings.

Sales for the third quarter were $1.5 billion, an 8.8% decline from the same period a year ago and the second consecutive quarter Vons had a sales decline in the 8% range. Same-store sales for the third quarter--revenue from stores open at least 12 months--declined 10.6%.

“I’m surprised by the size of the same-store sales decline,” said Jonathan Ziegler, an industry analyst at Salomon Bros. in New York. “The good news is that this decline prompted Vons to launch an effort to recover some of the market share they’ve lost.”

Vons has lost 2% to 3% of its share of the Southern California market since 1991, Ziegler said, with Ralphs and Lucky among those that have made gains. Industry observers say Smith’s Food & Drug and Trader Joe’s may also have taken some of Vons’ business. With major players that include Food 4 Less, Albertson’s, Hughes and Stater Bros., Southern California is recognized as one of the nation’s most competitive grocery retail markets. Vons has 337 stores in California and 13 in Nevada.

Vons also faces challenges from warehouse stores such as Price/Costco and Smart & Final and will soon have to contend with Wal-Mart’s Sam’s Clubs. Wal-Mart recently agreed to buy 21 Pace warehouse stores in California from Kmart.

“The sales (declines) reflect the weak economic conditions in Southern California and the competitive activity of our competitors,” McAboy said. “Our goal is to become the low-cost operator in the marketplace and provide the highest service and store quality.”

McAboy would not provide details on the company’s price-cutting plans or strategies. The company is converting at least one of its Tianguis stores to an Expo store, which combines the conventional and warehouse store formats.

McAboy said Vons Chairman Roger Stangeland will accept a 15% pay cut and that the company’s other five top officers will take a 10% cut as part of the cost-cutting effort.

“Vons is particularly well-positioned to successfully implement and benefit from this program,” Stangeland said.

However, some industry analysts questioned whether the cost cutting will enable Vons to quickly reverse its slide.

“I’m not sure they can offset the negative forces of the Southern California economy and the heavy competition,” said Ed Comeau, an analyst at Lehman Bros. in New York.

Vons lost market share because it did not keep pace with its cost-cutting competitors, said Gary Giblen, analyst at Paine Webber in New York.

Vons said it is also conducting a search for a successor to Stangeland, who recently returned to the job after heart surgery in September. Dennis Eck, who once appeared to be Stangeland’s successor, resigned his position as president and chief operating officer last week.

Vons shares rose 37.5 cents Tuesday to close at $18.625 on the New York Stock Exchange.

The Market Leader

Vons has earned top market share in the Los Angeles-Long Beach area. Here are the top supermarket chains, ranked by market share percentage:

1)

2)

3)

4) 8.8

5) Food 4 Less 7.4

6) Albertson’s 5.4

7) Hughes 5.2

8) Trader Joe’s 1.4

9) Smith’s Food & Drug 1.3

Stater Bros. 1.3

Source: Progressive Grocer magazine; * Food 4 less, Boys, Viva and ABC stores Researched by ADAM S. BAUMAN / Los Angeles Times