Skaggs to Retire as American Stores Chief : Nation’s Top Supermarket Owner, Based in Irvine, Seeks a Successor

L.S. Skaggs will retire as chairman of the board and chief executive of American Stores Co., the nation’s largest supermarket owner, as soon as a successor is found.

The change of command, announced Tuesday by the Irvine-based company, had long been expected by company insiders. Skaggs, who recently reached American’s mandatory retirement age of 65, announced several years ago that he expected to retire after he reached that age.

At an American Stores board meeting Tuesday, Executive Vice President Victor L. Lund was elected president and chief financial officer. Skaggs had held the position of president in addition to being chairman of the board and chief executive officer.

Besides the Alpha Beta and Lucky chains in California, American’s Alpha Beta subsidiary also operates Skaggs Alpha Betas and Buttrey Food Stores in the Northwest. A second subsidiary, American Superstores, oversees three supermarket chains in the East and Midwest--Acme Markets, Jewel Food Stores and Star Markets. A third, Osco Drug, operates drugstores across the country.

An American Stores spokesman declined to comment on how long the search for Skaggs’ successor will take or whether the company is more likely to choose someone from inside or outside the organization.

Industry analysts, however, speculated that one potential choice is John M. Lillie, chairman of Lucky Stores, which American acquired for $2.5 billion earlier this year.

As its head, Lillie “essentially developed Lucky from a down-and-out company. He’s an excellent man and would make a great CEO,” said Edward Comeau, vice president with Oppenheimer & Co. in New York.

In fact, during American’s takeover of Lucky, “American could have alluded to Lillie that he would play a greater role in the organization at some point,” Comeau suggested.

Another candidate might be Jonathan L. Scott, who is chairman and chief executive office of American’s eastern subsidiary, American Superstores, Comeau said.

A retail veteran with experience at Albertson’s and Skaggs Cos., Scott is credited by the company with having co-pioneered the development of the combination food-and-drug store. Even so, Comeau said, Scott’s record as a former chief executive of A&P; was mixed and “the company didn’t do all that well.”

Industry insiders agreed that Skaggs’ job will be tough to fill.

In the past 35 years, “no one individual has had as much impact on the supermarket and drug industry as Sam Skaggs,” said Jack H. Brown, chairman and president of the Stater Bros. supermarket chain. “When you think about the amount of volume of the companies that he controls, no other individual has ever had that type of retail sales dollars before.”

With American’s acquisition of Lucky, Skaggs heads the largest supermarket chain in the nation. American’s grocery sales this year should reach about $10 billion on an annualized basis, according to Comeau.

The grandson of a Tennessee Baptist minister who founded the first Skaggs store in 1915, Skaggs has developed a reputation for savvy acquisitions and profitable asset sales.

His father started the Skaggs Co. by acquiring the Payless Drug Stores in 1939. Sam Skaggs later pioneered the “one-stop” concept of merging grocery and drugstores with Joe Albertson in the 1970s, then on his own purchased the rival Jewel Cos. in a hostile takeover in 1984.

Skaggs is widely credited with building American Stores from a regional drugstore operation into a 1,600-store, national supermarket and drug chain. American Stores last year had overall sales of $14.3 billion.

Most recently, he engineered American’s acquisition of Lucky Stores. The transaction has been criticized by some as too costly, but it is generally viewed as a good way to combat the declining sales and popularity of its Alpha Beta chain.

The effect of Skaggs’ retirement remains uncertain. “The company will probably be pared down and maybe become a little more focused,” Comeau said. “I would guess (the company) will take a hard look at where they want to be and what the investment is going to be because (American’s operations) may be spread too thin.”

Also on Tuesday, American announced that the board of directors has expanded to 18 members from 10. Instead of two management members and eight non-management members, the board will have six management representatives and 12 non-management directors.