Stater Bros. has no shortage of major-league rivals, operating in the same crowded Southern California markets as Kroger-owned Ralphs and Safeway-owned Vons. Stater Bros. Holdings operates more than 165 full-service Stater Bros. Markets in six counties, primarily in the Riverside and San Bernardino areas. About 25 of the regional chain's grocery stores host Super Rx Pharmacies. The grocery chain, which sold its milk-producing operation (Santee Dairies) to Dean Foods in 2009, plans to use the proceeds to invest in real estate and other growth opportunities. Founded in 1936 by twin brothers Leo and Cleo Stater, Stater Bros. is owned by chairman and CEO Jack Brown through La Cadena Investments.
Stater Bros. Holdings is the largest privately held supermarket chain in Southern California. However, the recent deep recession and ongoing economic malaise in region has the company holding the line on new store growth. Instead, it's focusing on remodels and replacement stores. Stater Bros. is also waiting for unemployment to begin trending down and sales to trend up before deciding how to invest some $250 million in surplus cash.
Chairman Brown says the company is willing to take a short-term hit to its bottom line in order to hold on to customers for the long term. To that end, Stater Bros. refinanced its debt in the first half of 2011 to allow it to continue to keep grocery prices low. Indeed, high unemployment in and competition from the grocery giants have put a strain on the sales and profits in recent years. After a tough fiscal 2010 (ends September), the sales pictures improved in the first three quarters of 2011 with sales up 1.6% vs. the previous year. While net income fell by more than 8% over the same period, the loss was narrower than in fiscal 2010 when net income fell by about 37%.
With more than 50 Wal-Mart supercenters and Target stores in the area expanding their grocery offerings, Stater Bros. has little choice but to keep prices low. To distinguish itself from rivals, it refuses to offer promotional games and frequent shopper cards, boasting everyday low prices and chain-wide temporary price reductions (called Stater Savers) instead. To better compete with Wal-Mart, the regional grocery chain cut prices on more than 10,000 products in all of its stores in mid-2009. In addition, its Super RX Pharmacy locations began offering up to a 14-day supply of selected antibiotics free to customers in fall 2009 and generic drugs for $4 per prescription in mid-2008.
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