Oct. 21--Tom Thumb says it's getting into the everyday-low-prices business and is stepping up local growth, with new stores planned in Rockwall, Frisco and Flower Mound and more in the works.

The supermarket chain, owned by Safeway Inc., says it's cutting prices on thousands of items beginning today to become a "more affordable and convenient one-stop-shopping experience."

The Texas division, which includes Tom Thumb in North Texas and Randalls supermarkets in Houston and Austin, is one of the last of 10 U.S. divisions to adopt Safeway's everyday-low-prices strategy.

Lowered prices are identified with yellow stickers and don't require a Rewards loyalty card. The company will still have Rewards card promotions and other weekly specials.

Some items are being cut 25 percent or more, said Tom Schwilke, president of the Texas division. "These aren't weekly specials that move up and down. Customers will see them every time they shop," he said.

A few examples: Its new Kraft Macaroni & Cheese price is 79 cents, down from $1.19. It cut Breyers ice cream in the 1.5-quart size by $1 to $4.99 and 16-ounce bottles of Kraft salad dressing to $2.09 from $2.85.

Price competition in the grocery aisles has become more important to shoppers trying to save money during the recession.

Wal-Mart Stores Inc. and Kroger Co. have outperformed Safeway and other rivals by pushing low prices.

Earnings discussion

In discussing third-quarter earnings last week, Safeway chief executive Steve Burd said customer traffic has been positive, but each shopper is buying fewer items than they did a year ago.

While shoppers switch to less expensive foods, prices for meat, produce and dairy have declined from last year's highs. Lower gasoline prices from a year ago also factored into a 7 percent decline in third-quarter revenue to $9.46 billion. Safeway reported better-than-expected net income of $128.8 million, or 31 cents a share, for the quarter. Still, that was down from $199.7 million, or 46 cents a share, a year earlier.

Schwilke couldn't say how the local market is performing, but he said, "We're investing here and not closing stores. While the economy has been better in Texas, this is the second year of a recession, but we feel good about Texas."

Tom Thumb's Dallas-area market share declined slightly to 10.4 percent from 10.7 percent in September 2008 but remains a solid No. 3, behind Wal-Mart and Kroger, and ahead of Albertsons, according to latest data from Nielsen Co.'s Trade Dimensions.

Building plans

In July, the company started building a store in Rockwall at 3070 N. Goliad St., its first new Tom Thumb in North Texas in more than five years. Other locations are planned in Frisco at Lebanon Road and FM423 and in Flower Mound at Bruton Orand Boulevard and FM1171, but they have no construction dates yet. Four more locations are in the works -- three replacement stores and one new store.

Since late 2005, when Safeway closed nine Tom Thumbs in the Dallas area, the company has been remodeling existing stores. That effort is about 85 percent complete.

Traditional supermarket chains lost significant market share in the region in the last 15 years as Wal-Mart expanded rapidly, first with its Supercenters and then its Neighborhood Markets. It now dominates the area with 40 percent of the $12.5-plus billion annual local grocery tab.

Tom Thumb can still be profitable as No. 2 if Wal-Mart is excluded, Schwilke said: "We've been in Dallas more than 60 years, and we're in some of the best locations."

-----

To see more of The Dallas Morning News, or to subscribe to the newspaper, go to http://www.dallasnews.com.

Copyright (c) 2009, The Dallas Morning News

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

NYSE:SWY, NYSE:KFT, NYSE:WMT, NYSE:KR,

A service of YellowBrix, Inc.