Ralphs Narrows Its Loss Sharply During Quarter

Ralphs Grocery Co., showing strong improvement financially, said Monday that it narrowed its first-quarter loss to $4 million.

The heavily indebted company, the No. 3 supermarket chain in Southern California, lost $7 million a year earlier. Sales climbed 8.5% to $620.9 million in the quarter ended April 22.

Analysts were particularly impressed with the company’s operating cash flow. A key gauge of performance for companies burdened with debt, operating cash flow is earnings before interest, taxes, depreciation, amortization and other accounting adjustments.

Ralphs’ first-quarter cash flow totaled $52.9 million, or 8.5% of its sales volume, up from 7.1% a year ago. By comparison, the cash flow of Vons--the No. 1 supermarket chain in Southern California--was 4.9% of sales in its first quarter.

“To even be anywhere near 8% is phenomenal,” said Meredith Adler, an analyst with First Boston Corp. in New York.

Byron Allumbaugh, Ralphs chairman and chief executive, called the company “a highly leveraged, LBO-type situation that’s working out extremely well.”

Ralphs officials noted that the results were helped somewhat by the Compton-based company’s lack of new store openings and remodeling projects in the quarter. The chain expects to open 39 stores later this year and in 1991 and will step up its remodeling program.

On the other hand, the company’s net income continued to be pushed down by interest expenses on the $400 million in junk bonds Ralphs issued when it was spun off as an independent subsidiary of Campeau Corp. in August, 1988.

Ralphs’ profit also was hurt by two other factors: acceleration of a writeoff related to the 1988 spinoff and a charge for future executive compensation tied to the company’s market value. Allumbaugh said some of the increased accounting charges now will produce higher profit in coming years.

Along with being pleased by Ralphs’ recent performance, Wall Street appears to have grown more confident that the company will not be hurt by the problems of Toronto-based Campeau. Ralphs’ bonds closed at a bid price of 87.25 cents on the dollar Monday, up from around 70 in early March.