THE TIMES 100 : THE BEST PERFORMING COMPANIES IN CALIFORNIA : REGIONAL PROFILES : Keeping It Simple : WD-40, Price Co. Lead in San Diego by Doing One Thing

San Diego’s only two companies on this year’s Times 100--lubricant manufacturer WD-40 in the 12th spot and discount warehouse operator Price Co. in at 39th--have proven themselves durable leaders in the world of retailing.

Detractors have been saying for years that WD-40’s familiar blue cans of lubricant and Price’s chain of membership-only shopping depots were concepts too simple to withstand the inevitable onslaught of competition. Yet both companies remain prosperous, growing and two of the state’s top-performing companies in terms of return on equity over a two-year period.

Founded just 13 years ago by retailing genius Sol Price, Price Co. in particular has become a major corporate force. Last year, the company rang up $4.1 billion in sales, making it the state’s seventh largest service company and 22nd largest in sales among statewide public companies overall. The company also ranked 30th in market value and 92nd in sales growth, making each of The Times’ four most important lists this year.

Computer & Communications Technology Corp., a manufacturer of recording heads used in computer disk drives, was San Diego’s County’s fastest-growing company in sales over the past two years, largely by virtue of its 1987 acquisition of Acton Computer Technology of Goleta.

But CCT last year was staggered by overcapacity in the disk drive industry and announced huge lay-offs at its Tijuana and San Diego plants. The company recently reported a slight profit on a 33% drop in first quarter sales. On April 24, CCT President Robert B. Mollerstuen resigned.

San Diego County’s top stock performer during the past year was Rohr Industries, a Chula Vista-based manufacturer of aerospace components, including jet engine nacelles or pods. Rohr, which has been the subject of various takeover rumors during the past year, has been lifted by the rising tide of commercial aircraft orders and has seen its stock price increase by nearly 50%.

To meet increased demand for its products, Rohr has increased its payroll to 11,300 employees from 8,000 two years ago. In just one year, the company expanded its plant to 5.6 million square feet, an addition of 1 million square feet. Sales for the first six months of the current fiscal year were $476.1 million, up from $421.7 million over the same six months the previous year.

But the real star of The Times’ survey this year, from a San Diego perspective, was Price. When retail analyst Sarah Stack talks about Price, operator of 42 Price Club discount warehouses in eight states, she often describes the chain as the “Sears of the future.”

The irony of that description is that Price could not, in many ways, be more dissimilar from Sears. Price does no advertising, offers no credit, has no commission sales staff and cares not a whit about enhancing its corporate image.

But Price, much like Sears in its halcyon days, is being turned to by consumers for an expanding panoply of goods and services from food, stereos and eyeglasses to motor oil, tires and prescription drugs, all at rock-bottom prices.

Stack said the ascendance of Price in the retailing world also reflects the growing sophistication of consumers who are more knowledgeable about the price and quality of goods and less concerned with what the business schools call “distribution channels” or the retail outlets selling them.

“I fully expect Price to double its stores over the next five years and to become a truly bicoastal business,” said Stack of Bateman Eichler, Hill Richards in Los Angeles. Although Price operates discount warehouses in New Jersey, Connecticut, Virginia, New York and Maryland, the chain’s bread and butter business is concentrated in California and Arizona.

Apart from saying Price will open as many as five additional stores by the end of the current fiscal year in August, spokesman Dan Carter would not comment on its long-term expansion plans.

Despite a host of competitors attracted by Price’s fabulous success, Price seems only to get stronger as the years go by, registering a 25% growth in sales in 1988 and 22.4% so far this year. But unlike several of its competitors, Price’s growth has not come at the expense of profit. Net income in 1988 was up 29% over the previous year, and year-to-date profit in 1989 is up 25% over the same two quarters the previous year.

The measure of Price’s success is its $110-million average annual sales at each of its warehouses, which average 100,000 square feet, Stack said. That per-store sales average is more than double the sales of its nearest competitor, Costco Wholesale of Seattle, she said.

Analysts have been particularly encouraged by the growth in Price’s “same-store sales”--or sales at outlets open a year or longer--to 17% so far this year from 5.5% last fiscal year. Last year’s drop was caused by the “cannibalization” of some Price Clubs by the opening of several more outlets in certain markets.

Stack said Price has enlarged its mix of goods from a heavy concentration on food, liquor and hardware to include tires, clothing, books and, on an experimental basis, office furniture and prescription drugs.

“Over the past year or so, Price has started offering eyeglasses,” Stack said. “Prices are at least half of what you would pay at a typical optical center or eye doctor. Initially, they were sending their lenses out for grinding, but when they reached a certain critical mass, they went out and established their own lens-grinding facility, enabling them to lower prices to customers but making more for themselves by vertically integrating the business.”

The high volume per store gives Price supercharged buying power and, as a result, the highest gross margins in the discounting industry, said Ward Lindenmayer, a San Francisco-based independent retail stock analyst.

And yet, despite consistently effusive reviews of Price management in the business press, Price stock has languished between $35 and $40 a share over the past year and a half. The sluggish stock price was in part because of a settling of the company’s rich price-earnings multiple in former years and to Wall Street’s impatience with Price’s conservative approach to growth.

One competitor, Wal-Mart Stores’ Sam’s Wholesale Club chain, for example, got a later start but already operates more than 100 discount warehouses, Lindenmayer said.

“Price has been criticized for growing too slowly and giving up turf to people they didn’t have to,” Lindenmayer said. “One of the reasons they have grown slowly is they have insisted on buying their real estate, and it’s not easy to find appropriate 15-acre sites.”

Price stock has also suffered because of the company’s recent decision to issue a stock dividend of convertible preferred stock to each of its common shareholders. The dividend has Wall Street worried and somewhat confused, Stack said, about future dilution as well as the loss of cash in the form of dividends to preferred shareholders.

“(Price’s) record speaks for itself,” Lindenmayer said. “You can criticize them for going too slowly but the trade-off is that they have never slipped. I’d rather they open one new store and do $100 million than open three and have one fizzle.”

SAN DIEGO COUNTY REVENUE LEADERS

San Diego-based firms ranked by overall revenue.

1988 revenue % change Rank Company ($ millions) from 1987 1 Price Co. 4,140.5 25 2 San Diego Gas & Electric 2,076.1 9 3 Great Am. First Savings Bank 1,601.5 13 4 HomeFed Corp. 1,517.2 20 5 Imperial Corp. of America 1,161.4 8 6 Henley Group Inc.** 1,036.0 9 7 Fisher Scientific Group Inc. 957.7 5 8 Rohr Industries 906.8 37 9 Intermark Inc.* 714.2 25 10 Cubic Corp. 364.9 2 11 PS Group Inc.** 216.1 -42 12 Oak Industries Inc. 197.8 9 13 Cipher Data Products Inc. 185.4 4 14 Triton Group Ltd. 155.6 -61 15 Advanced Marketing Services 153.4 39

*See exceptions, page 38.

**See company notes, page 29.

SAN DIEGO COUNTY PROFIT LEADERS

San Diego-based firms ranked by profit from continuing operations.

1988 Change income in income Rank Company ($ millions) ($ millions) 1 San Diego Gas & Electric 189.4 10.2 2 HomeFed Corp. 111.3 11.0 3 Price Co. 94.8 21.4 4 PS Group Inc.** 60.7 56.7 5 Great Am. First Savings 50.3 (37.6) 6 Fisher Scientific Group Inc. 38.3 7.4 7 Rohr Industries 32.5 5.6 8 Intermark Inc.* 20.0 6.6 9 WD-40 Co. 15.5 4.5 10 Oak Industries Inc. 12.9 7.2 11 Cubic Corp. 12.2 4.3 12 Imperial Corp. of America 10.7 (39.8) 13 Cipher Data Products Inc. 10.4 6.1 14 Magma Power Co. 9.3 5.3 15 Advanced Marketing Services 5.1 1.5

*See exceptions, page 38.

**See company notes, page 29.

SAN DIEGO COUNTY MARKET VALUE LEADERS San Diego-based firms ranked by stock market valuation.

4/3/89 market value Book value Rank Company ($ millions) ($ millions) 1 San Diego Gas & Electric 2,117.1 1,379.9 2 Price Co. 1,790.7 479.5 3 Henley Group Inc.** 1,509.0 1,589.0 4 HomeFed Corp. 672.3 954.6 5 Fisher Scientific Group Inc. 618.9 327.4 6 Rohr Industries 588.2 374.7 7 Magma Power Co. 367.7 126.7 8 Great Am. First Savings 290.2 652.0 9 PS Group Inc.** 259.7 275.4 10 WD-40 Co. 249.2 36.5 11 Molecular Biosystems Inc. 176.4 26.0 12 Triton Group Ltd. 153.2 207.4 13 Cipher Data Products Inc. 130.6 148.7 14 Cubic Corp. 129.1 117.9 15 Burnham Pacific Properties 105.8 45.2

Market as Rank % of book 1 153 2 373 3 95 4 70 5 189 6 157 7 290 8 45 9 94 10 683 11 679 12 74 13 88 14 109 15 234

*See exceptions, page 38.

**See company notes, page 29. SAN DIEGO COUNTY STOCK LEADERS

San Diego-based firms ranked by percent gain in stock price.

% change 4/3/89 4/4/88 stock stock stock Rank Company price price price 1 Rohr Industries 49.7 33.50 22.38 2 Intermark Inc.* 35.8 14.50 10.68 3 HomeFed Corp. 30.1 31.88 24.50 4 PS Group Inc.** 22.3 36.38 29.75 5 San Diego Gas & Electric 20.2 37.88 31.50 6 Beeba’s Creations Inc. 18.2 9.75 8.25 7 Maxwell Laboratories Inc. 15.9 12.75 11.00 8 WD-40 Co. 14.8 33.00 28.75 9 Cubic Corp. 12.5 16.88 15.00 10 Henley Group Inc. 4.6 70.00 ** 11 Triton Group Ltd. 2.5 15.50 15.13 12 Price Co. 0.0 36.25 36.25 13 Cipher Data Products Inc. -1.4 9.00 9.13 14 Advanced Marketing Services -1.7 14.25 14.50 15 Great Am. First Savings -4.0 12.13 12.63

*See exceptions, page 38.

**See company notes, page 29.

SAN DIEGO COUNTY REVENUE GROWTH LEADERS

San Diego-based firms ranked by two-year average annual sales growth rate.

2-year avg. 1988 1988 annual sales revenue income(loss) Rank Company growth % ($ millions) ($ millions) 1 Computer & Commun.* 31.0 112.7 (1.02) 2 Precision Aerotech Inc.* 29.8 56.3 (3.05) 3 Price Co. 25.0 4,140.5 94.75 4 La Jolla Bancorp. 20.6 47.4 2.46 5 Western Health Plans 20.5 127.7 (8.04) 6 Rohr Industries 20.3 906.8 32.47 7 Intermark Inc.* 20.0 714.2 20.03 8 Oak Industries Inc. 14.2 197.8 12.86 9 Furnishings 2000 Inc. 13.1 108.2 (2.67) 10 Great Am. First Savings 12.9 1,601.5 50.28 11 San Diego Gas & Electric 12.7 2,076.1 189.36 12 HomeFed Corp. 12.2 1,517.2 111.27 13 Maxwell Laboratories Inc. 11.4 66.1 3.43 14 Henley Group Inc.** 10.9 1,036.0 (222.00) 15 WD-40 Co. 7.4 80.0 15.54

*See exceptions, page 38.

**See company notes, page 29.