Homeland Expanding with Cash Flow Funds

Article excerpt

Giving away ice cream is hard.

At least it is for some grocery store managers.

That's what Max Raydon found out when his company, Homeland Stores Inc., embarked upon an advertising program guaranteeing customer service. The program says that if three people are in line waiting to check out and pay for their groceries, another cash register will be opened until all cash register and check out stands are open.

If the store manager fails to do this, the person in line gets a free half-gallon of ice cream.

"It's not going well," Raydon, president and chief executive officer of Homeland, said. "It's not the cost of the ice cream, for we make it ourselves, it's just that it's hard for some managers to give away anything."

But this minor glitch is one of the few problems that Homeland has incurred since it became a private company as a leveraged buyout of the 106-store Oklahoma Division of Safeway Stores Inc.

Since the buyout in November 1987, the company has spent $40 million in a remodeling and upgrade program.

This has included:

- Remodeling 59 stores.

- Relocating several old stores into new buildings.

- Start of construction on four stores which are expected to be opened this year.

- Six more sites have been chosen for new stores.

- Three independent stores have been purchased and renamed Homeland.

- One store has closed.

- Adding 1,300 employees to the payroll.

- Promoting 860 employees into management positions.

All this activity has been accomplished through cash flow funds, Raydon said.

"And, I'm happy to report that we're two and a half years ahead of our loan repayment schedule," he said.

Since the leveraged buyout, organized by private investors and the New York investment firm of Clayton Dubilier along with Safeway's Oklahoma Division managers, the company has become a strong Oklahoma company, Raydon said.

"In fact we're looking toward the day when we'll either take this company public (make a public stock offering) or take other steps to make this an even more Oklahoma company," he said. "One day that will happen.

"Until then, we will continue to grow this company to increase our market presence within a 600-mile range through adding new stores and acquisitions."

The company has increased its share of the markets it serves by the rate of 2 percent per year since January 1988, Raydon said.

Success of Homeland is attributable to the "entrepreneurial attitude of employees," he said.

"When we took people out of the corporate environment and into the private company environment, it made a big change in the decision-making process," he said. "Our employees are owners of this company. So when they make a decision or a recommendation, they know they must also find out how to pay for it.

"Instead of the corporate attitude of making a recommendation with a full report, then letting someone else worry about costs and repayment, the employees know who's paying.

"It used to be that the buyers were looking for the best prices they could get because they didn't want that guy in Seattle to perform better.

"Now, those buyers are not only trying to get the best prices, but they also consider if the price is low enough so that it can be sold and attract the volume necessary to generate income to pay their bills. That's a big change."

But the road to taking a public company private has not been all easy for Homeland management. …