Smith’s Supermarkets to Leave Southland

In another supermarket retrenchment, Smith’s Food & Drug Centers, a Salt Lake City-based grocery chain that entered the competitive Southern California market five years ago, confirmed Monday that it will pull out of the region by selling or closing its 34 stores.

The operators of Southern California’s three largest chains--Ralphs, Vons and Lucky--moved quickly to divide up the pieces by announcing plans to acquire at least 16 of the stores in separate deals. Smith’s said only that it has reached agreements to sell 18, but did not say who had bought them.

Smith’s said the rest will be closed in the near future and eventually sold or leased to other retail companies.

The company did not say how many jobs would be lost, but industry observers said at least 1,600 jobs will be eliminated if buyers can’t be found for the remaining 16 stores.

The sell-off was expected. Industry sources said in November that Smith’s was trying to negotiate the sale of its Southern California stores. The company would not confirm such talks at that time.

Smith’s said it had decided to eliminate its presence in Southern California because “the difficult competitive environment made it impossible to earn an adequate return” on its investment here.

“When they planned their strategy for the state, California had a robust economy,” said Jack Brown, chairman of Stater Bros., another major Southland supermarket chain. “The downturn in the economy and the competitive environment hurt them.”

Ralphs, the region’s leading chain, bought eight of the stores: in Riverside, La Puente, Highland, Vista, Glendora, Beaumont and two in Bakersfield.

Vons, the No. 2 chain in Southern California, acquired four stores, in Yorba Linda, Torrance, La Habra and Grover Beach.

Lucky, the third-ranked chain, also acquired four stores. Those are in El Cajon, Lancaster, Oxnard and Hemet.

Smith’s--operator of chains in Utah, Arizona, Nevada and other parts of the Southwest--opened its first California store in Oxnard in September 1991.

Smith’s said a restructuring charge of about $85 million after taxes will be charged against earnings for the year ended Dec. 30, 1995, as a result of the Southern California sell-off.

Separately, Smith’s said it is in negotiations for the possible acquisition of the Phoenix-based Smitty’s Super Valu Inc. Smitty’s, which operates 28 stores in the Phoenix and Tucson areas, is owned by the Yucaipa Cos., the Los Angeles-based firm that also controls Ralphs Grocery Co.

In connection with the merger transaction, Smith’s said that it was also considering the repurchase of as much as 50% of its Class A and Class B common stock.