Federated Will Keep Investing in Ralphs Unit

Federated Department Stores said Thursday that it will continue to invest in its Ralphs supermarket division in Southern California now that problems arising from the chain’s recent rapid expansion and repositioning have been solved.

Howard Goldfeder, chairman and chief executive of Federated, told the company’s annual meeting in Cincinnati that Ralphs was among the seven Federated units targeted for future sales and earnings growth.

He said that Ralphs “took a successful pause in its physical expansion program last year. We expect an attractive return on investment from further expansion of Ralphs in the future, and for this reason we expect to continue to invest in it.”

There have been periodic rumors that Cincinnati-based Federated, which also owns the Bullocks and I. Magnin stores in California, was looking for a buyer for the food chain, which operates 126 stores in Los Angeles, Orange and San Diego counties.

Profit Margins Cut

Jan Charles Gray, a Ralphs vice president, explained that the food chain has spent the last three years absorbing 36 stores acquired from Market Basket and Fed Mart and adding another 15 new stores. In addition, last year Ralphs launched an aggressive price-cutting campaign that “substantially lowered its profit margins,” according to Gray.

In 1984, Ralphs’ operating profits totaled $43.9 million, or 6.3%, of Federated’s consolidated operating profit of $693.7 million. That was down from $50 million, or 6.8%, of the 1983 consolidated operating profit of $732.5 million. Ralphs’ sales, however, rose to $1.7 billion, or 17.7%, of Federated’s total $9.7 billion in 1984, from $1.5 billion, or 17%, of total 1983 sales of $8.7 billion.

Gray said that this year, Ralphs will begin building a $50-million, automated grocery warehouse in Glendale and will open one 70,000-square-foot store in Bakersfield. The new warehouse will enable Ralphs to continue to expand with six to 10 new stores in Southern California in 1986.