Harris Teeter’s Best Option Might Result In Multi-Billion Dollar Sale Of Prized Retailer
In my career I’ve written close to 50 stories about retailers or major consumer packaged goods companies seeking to explore strategic options or alternatives. The end of that pursuit almost always results in the “exploring” company selling.
So, I’m not buying the implication that Harris Teeter’s hiring of investment firm J.P. Morgan solely because two private equity firms expressed interest in acquiring the extremely desirable Matthews, NC retailer is just that. I think there’s more to the story.
Sure, it’s important for Harris Teeter to let its associates know that it wants to remain independent and strong and that its hand was forced when two Wall Street firms came a courtin’ (those types of inquiries are certainly material to the interests of HT’s shareholders). However, does anybody believe that, at the end of this process, Harris Teeter won’t be sold?
As one of my industry buddies noted, “When you’re among the prettiest girls at the prom, everybody wants to dance with you.”
And with the passing of every year, the upscale, service-oriented retailer seems to be getting better looking. From a measurable perspective over a five year view, virtually every metric – overall sales growth, earnings, share price, ID revenue and real estate expansion – have placed Harris Teeter among the leaders in its peer group.
And with intangibles such as morale of the associates, training and customer service, perception of its private label and overall enjoyment of the shopping experience, Harris Teeter also grades in the upper percentiles. And, did I mention that Harris Teeter’s 211 stores are all non-union?
Surely other suitors have come knocking on Harris Teeter’s door in the past, only to be told the company is not for sale. So why might this time be different?
Beyond the aforementioned fact that “The Teeter” has never been hotter are two thoughts: family perpetuation and Publix.
While Harris Teeter is publicly-traded, the stock is closely held by the Dickson family (a scenario similar to that at Weis Markets), who will no doubt have the primary say in the future of the company it acquired in 1969. At this point, CEO Tad Dickson is the only member of the family on the board. His father, R. Stuart Dickson left the board in 2006 (along with his brother Alan, who passed away last year). Tad Dickson is 58 years old and, like his father and uncle, cut his teeth in the thread business at American & Efird, a company that was sold in 2011. There seems to be no clear line of family leadership succession and much of the company’s success can be attributed to the work of Harris Teeter’s dynamic president Fred Morganthall and his team.
So, if there’s no clear path of succession and your company is rolling on all cylinders, wouldn’t the timing be right to consider selling?
And then there’s the Publix challenge. Although the two retailers are similar in style, appeal to a similar customer demographic and compete in several urban markets in the Southeast, the announcement last year that Publix would enter HT’s backyard in Charlotte couldn’t have been heartwarming news to the folks in Matthews.
Publix announced that Charlotte would serve as a separate operating division for the Lakeland, FL merchant, its northernmost expansion to date (it has already opened two stores in suburban Charlotte.)
While it won’t be easy to take business away from HT in its core region, Publix’s skill and patience will certainly adversely impact the long-term market share leader.
And Harris Teeter knows as well as anyone (just based on the number of sales inquiries it’s received over the years) that it is a very desirable commodity.
Don’t count out Kroger or Publix (which has never acquired a company as large as HT) as potential suitors. And while private equity started this process and always has access to a lot of capital, this strikes me as more of a strategic deal than a financial one.
That leaves Ahold. Flush with cash (especially after gaining another $3.1 billion for selling its 60 percent stake in Scandinavian grocer ICA in the past month) and hungry for acquisitions, Harris Teeter would be an ideal fit for the Dutch grocer, given the type of company it would desire and the adjacencies Harris Teeter would provide to its other stores.
If Ahold were to gain control of Harris Teeter, its network would encompass nearly 1,000 stores with dominant locations and strong market shares in New England, Metro New York, Delaware Valley, Central Pennsylvania, Baltimore-Washington, Richmond and (potentially) Tidewater as well as the key markets in North Carolina and parts of South Carolina.
So, my bet’s in: Harris Teeter will be sold by the end of the summer and I’m predicting that Ahold will pay handsomely for that prize.
For His Complete Body Of Work, Departed Supervalu CEO Sales Among Most Overpaid & Overrated Execs in Recent Industry History
It’s good to be Wayne Sales, recently departed chief executive of Supervalu. Wayne couldn’t even wait around to see his final act completed. Then again, why bother to stay at the company that is going to richly reward you ($12.8 million) for seven months of tortuous work engaging your friends at Goldman Sachs and Dunhill & Co. to unload a company that you watched unravel from your director’s seat and (since 2010) as non-executive chairman of the board?
No point in hanging in for another six weeks until the transaction is completed.Wayne, give yourself a pat on the back and a few more vanity mirrors for engineering such a coup. Besides the horrific sales, earnings and morale issues that have stunk up the joint inEden Prairieand at its operating divisions and distribution centers, weren’t you one of the biggest proponents of hiring Craig Herkert to become CEO in 2009? Where were you and your fellow board members during the entirety of Herkert’s tenure, in which earnings and overall sales declined and ID revenue dropped every single quarter for the 38 months “The Spinmeister” was at the helm? How misguided was your stewardship during that period? How about fiduciary responsibility to the shareholders?
However, when the pressure became so great that Herkert had to be relieved of his duties, who better than a former tire salesman (please note that I didn’t say “used tire” salesman) to lead the charge? After all, it appeared that not many people would be qualified to lead a company in such disarray. And, even if someone could be found, would he or she want to move to Minneapolis and, then, how much would you have to overpay him to accept the job, especially since Herkert would have to be paid a large severance because of a new contract he signed that you approved?
Yes, it must have been obvious by your own deduction skills that you, Wayne “The Commission-er” Sales, was the right man for the job. By that point, last July, the only remedy was to dump the company and hopefully gain some value for Supervalu’s shareholders who had been brutally punished during your entire tenure as director.
It was pretty smart of you to negotiate a generous contract even as you continued to lay off people and freeze bonuses and other compensation for the loyal worker bees who already had suffered greatly over the past six years.
However, your real coup wasn’t fully uncloaked until the SEC mandated the filing of a 14D-9 tender offer filing revealed your richly deserved severance. What a plan: move from chairman to CEO of a company that you helped damage, collect a king’s ransom for seven months of liaison work and then leave before the final whistle blows.
Brilliant, man, brilliant!
By the way, “The Commission-er’s” package breaks down to $8.1 million in cash and $4.7 million in equity. Also gaining lucrative exit packages were CFO Sherry Smith ($3.51 million); Janel Haugarth, president of SVU’s independent business ($3.65 million); and Andy Herring, EVP-real estate, market development and legal ($2.82 million). Those payments will be made when those executives are terminated from their positions within two years of the acquisition closing. All three executives also received retention bonuses after the company was put on the sales block last July.
On the other hand, I can’t praise the efforts of new CEO Sam Duncan enough. In the slightly more than three weeks since it was announced he would become chief executive of Supervalu and in the subsequent four weeks since he was officially installed, more than a dozen retailers (both from the independent ranks and from the regional chains that Duncan leads) have contacted me to praise Duncan’s willingness to meet with them, openly discuss problems and seek solutions.
Essentially, in fewer than 50 days, Sam Duncan has accomplished more than Craig Herkert did in more than three years on the throne.
Especially noteworthy were the positive comments of several independent retailers who met and chatted withDuncanand incoming Supervalu chairman Bob Miller at SVU’s cocktail party at the recent National Grocer’s Association (NGA) convention held inLas Vegasearlier this month.
This should come as no surprise to anybody who’s tracked Miller and Duncan’s careers. They are both operators who don’t tolerate a lot of process or BS. Their records indicate that sales come first and they’ve proven they can adapt to change quickly. That in itself will be a very refreshing change to the many divisional Supervalu associates who have been watching the “rope-a-dope” act of Herkert since 2009 and the inertia that existed from the Jeff Noddle regime three years before that.
Both Supervalu and its other Cerberus offset, Albertsons LLC, will have many challenges ahead based on the huge erosion that occurred during the two previous management regimes. But quality leadership usually yields results and I’m certain that better days are coming for what was once one of the grocery industry’s most admired companies.
Jeff Martin To Enter Vendor World; Named Senior VP-Business Development At Utz
When Jeff Martin abruptly resigned as executive VP-merchandising and marketing at Ahold USA last June it caught many of us off guard.
Martin was so good at his job – both in executing the exhausting day-to-day blocking that such a big role in the $25 billion organization entailed, but also utilizing his uncannily strong people skills – that his resignation certainly left a void at the largest supermarket retailer in the Northeast.
While Martin did admit that his grueling schedule had taken a toll on him, he also acknowledged that he needed to reshape his life as he approached his 50th birthday.
Prime among that reshaping was his friendship and subsequent marriage to Andrea Astrachan, who once worked with Jeff as Ahold USA’s VP-consumer affairs. He admitted that his relationship with Andrea caused him to rethink a lot of his priorities including becoming closer to his adult daughter who resides in Hagerstown, MD, the small city where Jeff was also born and raised.
Having spoken with Jeff several times after he resigned, it was clear that he would take his time before deciding on his next career move. Obviously, a one year non-compete with Ahold USA was a factor in his thinking, but when I’d speak with Jeff it became increasingly clear that he didn’t want to relocate from his Central Pennsylvania home where the couple live and where Jeff is helping Andrea raise her two children.
According to Jeff, the Utz opportunity came from out of the blue, originating from a phone call that he received from current Utz Quality Foods president Dylan Lissette shortly before Christmas. According to Jeff, a lot of common ground was covered in that initial conversation and within eight weeks a deal was hammered out.
When I spoke to Jeff and Dylan (separately) on February 13, both were excited. Jeff sees this as an opportunity to help accelerate the growth of one of the best regional brands in the country. He also recognized that he will be entering a culture that’s family-oriented with a terrific work ethic, not unlike the one he knew when he started at Martin’s in Hagerstown and helped maintain during his rise through the ranks at Giant/Carlisle and then AholdUSA.
Lissette, a member of the fourth generation of Utz leadership who has been with Utz for almost 18 years, and became president of the privately held 92 year old company in mid-2012, views Jeff’s role as a very important, necessary component to continue the company’s recent fast-track growth.
In the last two years, the Hanover, PA snack foods company has acquired Louisiana-based Zappe Endeavors (Zapp’s, Dirty and California potato chips), purchased Massachusetts-based Wachusett Potato Chip Co., and bought most of the assets of Reading, PA-based The Bachman Co. Additionally, the company has made further penetration into New England and expanded its diverse snack line into the Atlanta market.
“Our goal is to continue to grow our strong brands,” said Lissette, who’s only 41. “I think Jeff can help us with that objective. He knows the grocery business very well and, based on our relationship with him when he was at Ahold, it’s clear that he brings a wealth of knowledge in strategic planning, business development and leadership to Utz. I’m also very confident that his excellent people skills will allow him to mesh immediately with our diverse and very talented senior leadership team.”
Martin added: “I am excited to join Utz…it’s the largest independent privately held snack brand in theU.S.Its success in the snack foods market has been built upon a strong reputation of superior product quality and excellent customer service since 1921. It’s family owned, and we share a lot of the same core values. With over $500 million in sales, nine manufacturing plants and almost 50 distribution centers, I look forward to utilizing my diverse retail background to assist in the continued growth of Utz. They’re well positioned for continued growth and success and I’m pleased to be a part of the team.”
We wish both gentlemen well in this exciting new endeavor. With what I know about this successful Utz team, it will be fun to watch this franchise expand!
Shop ‘n Bag Retailer Wins Landmark Judgment Against Landlord, Dollar Tree Stores
In what is believed to be a landmark decision involving supermarkets successfully litigating against encroachment from other retailers selling similar products, Philadelphia-based Holiday Supermarkets, Inc. has prevailed in its effort to thwart Dollar Tree Stores from continuing to sell grocery and food products, including refrigerated and frozen food, at its store in the Mayfair Shopping Center in Northeast Philadelphia.
On January 29 in Philadelphia Commerce Court, a jury unanimously agreed with the Gilbert family (Harry, Catherine, Gary, Mark and Kathy Gilbert Irwin), which operates four independent supermarkets (three Shop ‘n Bags and one Thriftway), all in the city, that the landlord violated the exclusive use provision in Holiday’s lease by allowing Dollar Tree to directly compete in the same shopping center with the Gilberts’ Shop ‘n Bag store by selling the same types of food and grocery items.
Holiday Supermarket has anchored the center since it was built in 1992. This case actually dates back to 2003 when Dollar Tree became a tenant in the shopping center. While Dollar Tree sold food and grocery products from the inception of its lease,Holiday’s owner, Harry Gilbert, had no idea. “Honestly, I thought they were only selling candy and gum,” Gilbert noted. Gilbert did not suspect that Dollar Tree may have been directly competing against his store in violation of his lease until sometime in 2006 or 2007 when he heard that Dollar Tree had installed refrigerated and frozen cases. Harry Gilbert immediately complained to the landlord at the time (Regency Realty and USRP I), which responded by sending a letter to Dollar Tree in August of 2007 to cease and desist from selling food and grocery items in violation of Holiday’s exclusive rights. This request was ignored.
In 2009, Gilbert again complained about Dollar Tree’s continued food and grocery sales, this time through his attorneys. The landlord’s legal department sent a second cease and desist letter which also was ignored. Despite acknowledging that Dollar Tree was violating Holiday’s lease rights, the landlord was unwilling to take legal action against Dollar Tree. This forced the Gilberts (Holiday) to commence a lawsuit in 2009.
In 2010, a Philadelphia judge, Albert W. Sheppard Jr. (who has since died), dismissed Holiday’s lawsuit, finding that Holiday’s lease was limited to competition from other supermarkets and Dollar Tree was not a supermarket. At that time, Holiday retained new counsel, White and Williams LLP, who was successful in getting the decision reversed on appeal. This time the case was heard by Judge Patricia McInerney. The case was remanded for a jury to determine what the original parties to the lease intended by the restriction which gave the lessee the exclusive right to operate a “retail supermarket of any nature.”
After a five day trial, the jury found that the Mayfair Dollar Tree store was a retail supermarket of some nature and that the landlord (Regency Realty and USRP I) violated the exclusive use provision in the Gilberts’ lease by allowing Dollar Tree to sell food and grocery products in competition with the Gilberts’ Mayfair Shop ‘n Bag.
Dollar Tree argued that there was no lease violation because it was not a retail supermarket. But Holiday’s attorney, Justin Proper of White and Williams, effectively proved to the jury that the original parties to the lease did not intend for the language “retail supermarket of any nature” to simply limit competition from other traditional supermarkets. Instead, Proper was able to prove that the parties intended the lease to prohibit competition from any business selling food and grocery items in competition with Mayfair’s Shop ‘n Bag’s business.
The key testimony in this regard came from a video deposition taken of Ed Heller, the attorney who represented the original lessee Fleming Foods (Holiday was a sublesee of Fleming, the now defunct wholesaler). Heller testified that he had represented Fleming for over 30 years in its lease negotiations with landlords and that all the company’s leases contained broad language to provide the supermarket anchor tenants with protection against competition from other businesses, not just supermarkets. Heller testified that both parties understood that this was the intent of the language “retail supermarket of any nature.”
After deciding the issue of original intent, the jury found that Dollar Tree was operating a retail supermarket of some nature by selling the same types of food and grocery items as Holiday. The evidence at trial showed that the Mayfair Dollar Tree’s food and grocery sales had increased year after year since 2006, comprising well over 50 percent of its total sales in 2012. This increase is consistent with Dollar Tree’s corporate policy of increasing the sale of food as a means of driving customer traffic into their stores. According to Proper, the former store manager at the Mayfair Dollar Tree testified that he knew his store was taking customers away from the Mayfair Shop ‘n Bag and he suspected corporate knew this as well.
The case was bifurcated (the jury was only asked to decide whether the landlord breached its lease with Holiday) and a separate trial will be scheduled to decide the issue of damages.
While Holiday did not pursue any direct claims against Dollar Tree, Dollar Tree brought a declaratory judgment action in which it sought a declaration or ruling from the trial judge concerning the parties’ respective lease rights and obligations. Judge McInerney agreed with the jury, finding that Dollar Tree has been operating a retail supermarket of some or any nature since the inception of its lease in 2003. This court’s ruling is a final order which is appealable and Dollar Tree is expected to appeal.
An interesting twist in the case is that the shopping center was sold in 2010, so if the appeal is not heard (or the Gilberts prevail on appeal) the new landlord (WP Realty) would be assigned the task of potentially evicting Dollar Tree. Those trials and rulings probably won’t take place until later this year or early 2014.
Asked about how this verdict may affect other supermarkets that are facing similar encroachments by non-traditional retailers selling many similar items, Proper stated: “While the language of every lease is unique, this case has potential broad implications for all supermarket operators whose exclusivity rights have been violated. In my opinion, the nature of Dollar Tree and other dollar stores’ business would allow a jury to find violations of many different types of lease restrictions, including leases that restrict competition from other supermarkets, food stores, grocery stores, and the like.”
Proper commented, “Dollar stores like Dollar Tree have made a conscious decision to operate as non-traditional supermarkets which they have every right to do provided, of course, they do not violate the exclusive lease rights of the anchor supermarket.”
As for Harry Gilbert, one of the true veterans of the grocery industry (who started in the business as a 13 year-old with Frankford Unity and formed Holiday Supermarkets in 1970), was filled with so much emotion that he rejoiced in a loud and cheerful that “Today justice has been served!”
“It’s been going on for so long; there were many times that I just wanted it to end, but I knew we had to persevere because we were doing the right thing. The jury saw through the smoke screen from Dollar Tree’s high powered attorneys and accepted Mr. Justin Proper’s clear and concise presentation of the true facts. I think this sends a message to independent retailers that you can’t be bullied by big corporations who try to steamroll small business owners by forcing them to pursue expensive litigation. Our business was unfairly damaged by the actions of the landlord and Dollar Tree and the jury’s verdict clearly reflects this fact.”
Beyond the potential powerful impact of the legal ruling, it’s important not only to note the courage and perseverance of the Gilbert family, especially patriarch Harry Gilbert, who could have easily just licked his wounds and saved hundreds of thousands of dollars in legal fees and five years of stress by just accepting what is a growing problem among supermarkets. Harry set an example for all retailers who see the terms of their leases violated or compromised.
Nothing against Dollar Tree, one of the most successful and fastest growing merchants in the country and the best run, in my opinion, dollar store operator in the industry. Dollar Tree has a great operating model, but to deny that its store on Sackett Street in Northeast Philadelphia is not competing with the Gilberts’ Mayfair Shop ‘n Bag unit is profoundly absurd.
In the end, neither Dollar Tree nor the landlord could provide a credible defense to the court, but as so often happens, big publicly-traded corporations believe their best strategy is to throw more money into the process hoping to deter the little guy. Unlike a lot of retailers (particularly independents), who face these types of competitive threats to their businesses and understandably find the field of battle too costly or exhausting to engage, old warhorse Harry Gilbert would have none of this attempted power play.
Sure, Dollar Tree will appeal (it’s only the shareholder’s money) and wishfully the Appellate Court will once again rule in the Gilbert’s favor. And hopefully, this legal precedent will set the standard for other retailers to fight back and defend their tenant rights.
Local Notes
There will be a new UFCW Local 400 election this spring after United Food and Commercial Workers International president Joe Hansen found merit in claims that former president Tom McNutt (who resigned late last year) may have violated union bylaws by working on his campaign during working hours (not vacation time) in the previous Local 400 election last October. The allegations were made by candidate Ralph Ramirez who finished third in that election. However, after further review, this seems more like a technicality since Ramirez received fewer than 500 votes from the largest UFCW Local in the country with about 35,000 members. Actually, new Local 400 president Mark Federici has done a fine job since taking the helm late last year, providing a calmer, more balanced approach than his predecessor…Weis Markets has named Wayne Bailey, VP-supply chain and logistics, a new post at the Sunbury, PA retailer. Bailey, who’s spent his entire career at Weis, is well-suited for this emerging and important post, having previously served as VP-merchandising and most recently as a regional VP in store ops. We wish Wayne all the best as he gets fitted for a new Weis hat. Also at Weis: Rick Seipp has been promoted to VP-pharmacy operations, replacing Joseph Douglas. Seipp came to Weis from Rite Aid in 2010. The regional chain, which was feted at the annual Multiple Sclerosis dinner/fundraiser at the Marriott Waterfront Hotel in Baltimore on March 2, cut the ribbon on two new (former A&P/Super Fresh) stores the next morning in Towson, MD (55,476 square feet) and Woodlawn, MD (Security Boulevard – 58,027 square feet). Weis invested $14 million in the two stores. A third A&P acquisition in Hillsborough, NJ, should open later this year…down the road apiece from Sunbury, hats off to Ahold USA and its “Our Family Foundation” for donating nearly $67 million to charitable endeavors through its retail banners last year. About $31 million of that amount came in the form of hunger-related donations. Ahold USA also announced a new three year initiative to distribute $9 million in “Fighting Child Hunger” grants from its foundation. In financial news from the big Dutch retailer, it was a very good fourth quarter for the men and women from Amsterdam and Carlisle. For the period ended December 29, 2012, Ahold’s overall sales rose 5.1 percent to $10.1 billion and underlying operating income jumped 4.1 percent to $461.5 million. At AUSA, net sales were up 4.3 percent to $6.1 billion and ID revenue increased 2.4 percent. Operating income was up $16 million to $255 million and the 765 U.S.supermarkets provided a 4.2 percent operating margin. “During the year, customers were focused on price and promotions, without compromising on quality. In response, we were able to simplify our business and save costs so that we could invest more into offering great value to our customers. We were able to increase the target for our 2012-2014 cost reduction program from $455 million to $780 million by further driving our efforts to simplify our business where we see opportunities, such as optimizing our commercial processes and driving own-brand profit. As part of our strategy we are broadening our offering to customers. Our U.S.businesses are improving their own-brand product lines to give customers more choices at different price points to fit their budgets. We are building our online business on both continents to give customers more shopping alternatives, and we continued to achieve double-digit online sales growth in food. Our acquisition of online retailer bol.com enabled us to provide Dutch and Belgian customers with a far wider selection of non-food products. Customers appreciate the convenience of the pickup points we opened during the year, including the first Peapod pickup points in the United States, and our first pickup points in the Netherlands,” said Ahold CEO Dick Boer. One final thought about the Northeast’s top retailer: with Giant/Landover’s senior VP-operations Shane Sampson departing to reconnect with his Albertsons roots (he’ll head up Shaw’s in New England – truly a daunting task) and Jim Nazzaro exiting a few months earlier as VP-sales and merchandising, the big regional banner has lost its top two sidemen to president Anthony Hucker…Mark Ordan, co-founder of Fresh Fields and former CEO of Sutton Place has been named to the board of Harris Teeter. Clearly, the very bright entrepreneur will have a lot on his plate as he joins the Matthews, NC retailer at a very pivotal time in its history…another North Carolina based retailer, Delhaize America (DA), is also making news, but this ain’t the kind of news that will make you applaud. Roland “Chainsaw” Smith, who replaced the retired Ron Hodge as CEO last October, has already gutted his management staff and announced that about 45 stores (Food Lion, Sweetbay and Bottom Dollar units) would close by the end of this month. To perform that kind of whackin’ in only three months is quite remarkable. Clearly, beleaguered DA needed a major overhaul, but the fear here is that Smith really hasn’t recruited any notable replacements from the outside or promoted broadly from within the ranks of the Salisbury, NC retailer. He seems to have essentially given more responsibility to those executives who made the cut. That’s putting enormous pressure on those who have taken on more responsibility without any visible payoff thus far at store level or with sales. In the past few weeks another round of layoffs was announced; this time 350 associates (500 if you include 150 “open” positions) above the store manager level were riffed. Smith’s mandate clearly is to “change the view” at the struggling Belgian-owned retailer, but you’ve got to wonder how this will pay off in the long run without a discernible new game plan…talk about the continued unpredictability of financial analysts – Whole Foods’ recently completed first quarter (ended January 20) met with disappointment by those Wall Street process jockeys when the Austin, TX retailer posted numbers slightly below expectations. Here are the hard numbers and I’ll let you judge how “disappointing” the fast-growing retailer’s performance actually was: net income (profit) increased 24 percent (to $146 million); overall sales gain was 14 percent (to $3.9 billion); and identical store sales increased 7.9 percent. Additionally, Whole Foods opened 10 stores in the first quarter and has opened one store so far in its second quarter and will debut another five new units in the current period. It has also signed 11 new leases including units that will open in Toronto, Canada; Berkeley, CA; Los Angeles, CA; West Palm Beach, FL; Lafayette, LA; New Orleans, LA; Westford, MA; St. Louis, MO; Cherry Hill, NJ; Colleyville, TX; and Newport News, VA.These stores currently are scheduled to open in fiscal 2014 and beyond. The company also terminated one lease for a 57,500 square foot store in development believed to be the Riverdale, MD project in Prince George’s County. I think co-CEO Walter Robb framed the quarter correctly when he said: “We opened a record number of stores and delivered another quarter of strong sales and earnings growth. We are well-positioned to internally fund our expansion plans and have the pipeline and infrastructure in place for square footage growth to accelerate through 2014 and hopefully beyond.”…Safeway also enjoyed a solid fourth quarter with profits up 13 percent to $244 million, overall revenue gained 1.3 percent and ID sales (excluding gas) increased 0.8 percent. In his conference call to analysts following the financial release, Safeway CEO Steve Burd, who will retire from the chain he has led for 20 years in May, touted the early success of its new “Just For U” digital platform and said that the program’s success could enable the big Pleasanton, CA chain to eliminate print newspaper ads perhaps as soon as the end of this year. Locally, Safeway will cut the ribbon on its remodeled and expanded Belle View (Alexandria, VA) unit on March 15. That store has been closed for about s
ix months while undergoing extensive renovations and the addition of 5,300 square feet. It will be 45,000 square feet when it reopens…despite predictions of gloom and doom regarding first quarter sales, Wal-Mart had a solid quarter with total sales jumping 3.9 percent to $127.5 billion and earnings increasing 7.9 percent to a whopping $5.6 billion for the period ended January 31. Comparable store sales at its U.S.units grew by 1 percent. The Bentonville Behemoth also acknowledged it has spent $157 million thus far on its internal investigation concerning the role Wal-Mart executives played in the 2004 Mexican bribery scandal. And then there’s an interesting Wal-Mart story that appeared in Bloomberg News concerning rising out-of-stocks at the planet’s largest retailer. Bloomberg reportedly got hold of some minutes from an internal memo fromU.S. CEO Bill Simon, who said that the problem is “self-inflicted” and getting worse. Simon added that out-of-stocks posed the biggest risk to Wal-Mart’s growth. However, Wal-Mart spokesman David Tovar said the company was “very pleased with our out-of-stock position.” Huh? Have they let Tovar out of the main office in Bentonville to visit stores occasionally? Perhaps if Mr. Tovar spent less time at his “spinning” class and actually recognized that Simon’s statements were painfully spot-on, he’d have more credibility with the media in general…in major CPG news, Warren Buffet’s Berkshire Hathaway group and Brazilian businessman Jorge Paulo Lemann, principal in 3G Capital (a couple of billionaires who happen to be personal friends), have agreed to acquire H.J. Heinz for $28 billion including the assumption of $4 billion in debt. Each party will control 50 percent of the acquisition. That’s a whopper of a deal especially for Lemann, whose firm acquired control of Burger King in 2010, and might know a little bit about ketchup consumption. However, this deal is months away from final FTC approval and might be slowed by an SEC inquiry that froze the assets of an unnamed Swiss trading account which the agency claimed made $1.7 million from options purchased the day before the Heinz deal was announced… some quick takeaways from last month’s National Grocers Association (NGA) convention held in Las Vegas. First, it was the best NGA show I’ve ever been to, and who would have thought Natan Tabak, senior VP and CIO at Wakefern was such a funny guy? Also, Joe Sheridan, Natan’s boss and this year’s NGA chairman, proved once again that he’s an enlightened and charismatic industry leader. Both appeared in an industry conference entitled “Growth Opportunities for Independents: Four Major Trends.” Also on the panel was Tom Furphy, CEO and managing director of Consumer Equity Partners. Clearly, a man with a 30 pound brain, Furphy previously was VP-consumables for amazon.com, which included AmazonFresh, where he supervised the Internet giant’s emerging grocery, HBC and fresh business. His message to traditional bricks and mortar retailers was daunting and somewhat scary, predicting exponential growth for online shopping in a short period of time…a few obituaries of note to report: passing on last month was Andre Cassagnes, 86, the French electrical technician who invented the Etch A Sketch, one of the greatest toys ever created, especially for people like me with limited artistic chops and a short attention span to boot. Cassagnes, who invented his device in the late 1950s, subsequently sold his meal ticket invention to the Ohio Arts Company, which still owns and produces Etch A Sketches for global pleasure. Also departing terra firm was C. Everett Koop, 96, perhaps the most influential surgeon general inU.S. history. Koop, who served eight years as the “nation’s doctor” during the Reagan administration, was a game changer in terms of his stance against the evils of tobacco and his role in candidly informing the public about the emerging AIDS epidemic. Long before he became surgeon general, Koop was widely recognized as a pioneer in the field of pediatric surgery. Two musicians from opposite ends of the spectrum also passed away last month. Van Cliburn, the classical pianist who stunned the world by winning the first International Tchaikovsky Competition in Moscow in 1958 when he was only 23 and the Cold war was at its peak, has left us. Cliburn’s performance at the Moscow musicfest was so impressive, even Russian Premier Nikita Khrushchev, the most evil of men in the eyes of the U.S. government at the time said, “If Cliburn’s the best, then give him first prize.” Cliburn died in Forth Worth, TX at the age of 78. And bluesman “Magic Slim” (born Morris Holt and not be confused with other blues legends “Magic Sam” or “Slim Harpo”) has also died. Born in 1937 inTorrance,MS, Magic Slim followed other blues greats Muddy Waters and Howlin’ Wolf up from the Delta toChicago to hone his craft. During his career, the guitarist and singer released more than 30 albums and won the 2003 “Blues Music Award.” “If you were going to take somebody who’d never seen the blues to one of Magic’s shows, it would be like putting them in a time machine and putting them in 1962,” said Marty Salzman, his manager. “No frills, no rock ‘n roll. It was just straight- ahead, real-deal blues.” Great description; I would have liked to visit that place in time.