Taking Stock

After 18 Months And 11 Stores, Publix Fails To Make Significant Impact In Richmond

Earlier this month, Publix opened its 11th store in the Richmond market. And while it’s still too early to gauge the performance of its 50,000 square foot Mechanicsville unit (first in Hanover County), don’t be surprised if Publix’s newest location turns out to just as underwhelming as the majority of stores it has opened since entering the Richmond area in July 2017.

Which on one level is surprising given the stellar reputation and performance that the Lakeland, FL-based chain enjoys with its customers in other Southeast markets. However, on closer inspection, Publix’s disappointing entry shouldn’t be surprising at all.


First, it’s always difficult being the new guy on the block. And in a medium-sized market like Richmond, Publix entered a landscape that was already overstored and featured a diversity of retail operating styles and formats. As newcomer Lidl (which debuted in the capital of the Old Dominion a month earlier) found out – being wedded to your established format isn’t always going to work, especially if you’re intractable to change.

And that’s been the primary reason, in my opinion, why Publix’s sales aren’t where many trade observers believe they should be.

Publix’s super clean stores and strong customer service are hallmarks that have led the employee-owned chain to dominate the entire state of Florida, Alabama and parts of Georgia and Tennessee. In all those markets, there are an abundance of stores, all consistently well run which has brought Publix great success and profitability.


But as the 1,200-store chain has continued to expand northward into Charlotte, Raleigh and now Richmond, it has not dominated like it has in most other markets where it operates.

Sure, we’ve heard the story about how in the early 1990s Publix planted its flag in Marietta, GA and despite years of challenges, it hung in by staying true to its core philosophy to ultimately become a dominant force in the Atlanta area. Similar examples can be shown in Birmingham and Nashville.

But this is 2019 and the industry has radically changed. The “wait it out” mindset isn’t going to work for Publix (or any other retailer in any market). Shortly after Publix announced it would acquire 10 stores from Martin’s (Ahold Delhaize) in 2015, existing competitors Kroger and Walmart were already developing counter strategies against Publix who they already competed against in other markets. When Wegmans opened its first store in May 2016 on Midlothian Turnpike it was easy to see that the uber-merchant had the potential to crush Publix’s existing vanilla model.

So, when Publix cut the ribbon on its first Richmond store in Glen Allen, VA (a “from the ground up” store, not a rehabbed Martin’s), I was surprised that the company seemed to make virtually no adjustments to compete more effectively against a strong field of competitors.

As Publix began to open more stores, it was obvious it wasn’t interested in making the changes that I believed were necessary to win over consumers. Some might argue that its 50,000 square foot prototype is too small to effectively compete in a market that features 90,000 square foot non-Marketplace Krogers and 120,000 square food Wegmans. I don’t think size is the real issue; as the new kid in town you’ve got to prove your differentiation and your advantages. With among the highest retails in the market, not enough local, specialty and ethnic products and a mediocre perishables program (especially in prepared foods), Publix has done little of either.

While a handful of stores in the Richmond market won’t alter its tremendous profitability or deter its growth plan in the market – it plans on opening new stores in the Carytown section of Richmond, on West Broad Street in Henrico County, on Three Chopt Road and on Charter Colony Parkway and the former Huguenot Shopping center, the latter two in Chesterfield County.

And Publix is also struggling in the Raleigh-Durham area where it currently operates six stores and has several other new supermarkets planned. Also coming to the Triad area of North Carolina is Wegmans with five planned stores. Currently, Richmond is the only market where the two regional chains compete.

Moreover, Publix is being handicapped by a key supply chain issue – its closest distribution center is located in Dacula, GA, hundreds of miles from its stores in Virginia and North Carolina. While a new 2 million square foot DC in the Greensboro area is planned, it won’t be ready for another three years. And when compared to Kroger and Walmart, Publix is also lagging in e-commerce and digital connectivity.

Publix certainly has the wherewithal to turn its Richmond problems around, the bigger question remains whether it’s willing to. After 18 months, it has shown a distinct unwillingness to adapt to the realities of the local market.

That’s a problem that won’t go away.

‘Round The Trade

According to Adobe Analytics, bricks and mortar retailers such as Walmart, Target and Best Buy gained ground on Amazon during the holiday season by offering a combination of online ordering and in-store pickups. According to the San Jose, CA-based data processing and analytics firm, buying online and picking up in-store spending increased 47 percent from November 1 to December 19. The minimal presence of bricks and mortar ammo in Amazon’s arsenal is obvious, but according to a story in the Wall Street Journal, “Godzilla” is priming a bricks and mortar expansion of its own. The Seattle-based merchant plans to open new Whole Foods stores in markets where there is no current WFM presence and include mini-warehouses in those units for pickup and delivery of Amazon orders. Amazon’s relatively light presence in the world of bricks and mortar clearly provides an advantage for other retailers that offer such services (even more so if they’re also using Instacart, Shipt or Peapod). However, you can bet that their advantage won’t last too long. Because by adding more WFM stores, developing more Amazon Go units or making another big physical store acquisition, many of us feel that Amazon will fully occupy that space, too, in a few years…Costco continued its record sales and earnings pace, posting a 10.3 percent sales increase in its first quarter ended November 25. Comp store revenue (excluding fuel) jumped an impressive 8.3 percent, in-store traffic increased 5.2 percent and its e-commerce sales rose 26.6 percent. Profits were also strong – a 19.8 percent gain to $767 million. Costco CFO Richard Galanti said that despite the strong numbers, other club operators and some supermarkets were impacting the Issaquah, WA-based merchant’s “fresh” margins. “Our competitors are working in a little lower margin there and we’re not going to let anybody take it away from us,” he explained. He added that he expects Costco to open 20-23 net new clubs (and four relocations) next year. That likely includes a new store in Harrison, NY (where Wegmans is also building a new unit) and possibly Cherry Hill, NJ (which also may open in 2020)…speaking of Wegmans, the family-owned juggernaut has begun hiring and training associates at its Brooklyn, NY store – its first in NYC – which is slated to open this fall. The 74,000 square foot unit will anchor a $140 million redevelopment at the former Brooklyn Navy Yard in the Red Hook section of the borough. Next up for Wegmans is its first Tidewater store in Virginia Beach on April 28 and later in the year it will cut the ribbon in its first (of five) North Carolina stores in Raleigh…our buddy Anthony Hucker, former president of Giant/Landover and current CEO of Southeastern Grocers, has been awarded more than $4.5 million from another former employer, Schnuck’s Markets. Hucker sued the St. Louis-based regional chain after it fired him in October 2016 for what an arbitrator ruled was wrongful termination. As long as I’ve known the erudite Englishman, no matter the strengths of the headwinds that he faces, he always seems to be land on his feet – with a smile.

Local Notes

It looks like we’ll know something about the status of Shoppers’ 46 remaining stores very soon. Multiple sources are telling us that retailers should be notified about January 25 if they’ve successfully bid for one or more stores. Once the notifications have been made, Shoppers would have to provide store associates with a 60-day WARN notice of closure. My guess is that slightly more than half of the remaining stores will be grabbed during this first auction round. And to further perpetuate the handicapping game, I’m wagering that Giant Food, Safeway, Harris Teeter walk away with multiple stores. And don’t be surprised if retailers from other trade channels – perhaps Target, Aldi and Lidl – also make successful bids. About five other Shoppers stores have already closed over the past sixth months with Giant Food acquiring three units…much like the ham-handed leverage plays attempted by private equity firms Blackwells Capital (Supervalu) and Third Point LLC (Campbell’s Soup), another PE firm is trying exercise more control (and ultimately more money?) over another food company – Dollar Tree stores, the nation’s second largest dollar store operator based in Chesapeake, VA. It seems that Manhattan-based Starboard Value is pressuring Dollar Tree to sell its Family Dollar business (which it bought for $8.5 billion in 2015) and is also seeking to replace seven of the discounter’s 12 current directors. Starboard Value has acquired 1.7 percent of Dollar Tree’s shares which are valued at approximately $370 million. Not surprisingly, Dollar Tree is rejecting Starboard Value’s offer, noting that its current board (which includes four new directors who were added since 2016 including its newest board member – former Harris Teeter CEO Tad Dickson who joined on January 1, 2019) is equipped with the right skills and perspectives to make its Family Dollar unit a success. It already stated that it will remodel 1,000 Family Dollar stores and convert another 200 units to its core Dollar Tree banner. “We believe that Dollar Tree is deeply undervalued and significant opportunities exist to create value,” said Starboard CEO Jeffrey Smith in a letter to Dollar Tree’s board. Blah, blah, blah…and speaking about questionable PE companies, the Washington Post has an interesting and sad story about Sun Capital Partners, the venture capital firm whose holdings included regional grocery chain Marsh Supermarkets. After Marsh, which had the double whammy of being poorly run by larcenous former CEO Don Marsh in the years leading up to Sun’s acquisition 2006, and by Sun’s leadership itself, went bankrupt in 2017, the PE firm was allowed to recoup much of their investment while more than $80 million of pension fund debt and other severance agreements were flushed away. “It was a long, slow decline,” said Amy Gerken, formerly an assistant office manager at one of the stores. “(Sun Capital) didn’t really know how grocery stores work. We’d joke about them being on a yacht without even knowing what a UPC code is. But they didn’t treat employees right, and since the bankruptcy, everyone is out for their blood.” The Post story points out that, all told, Sun Capital, based in Boca Raton, FL, has sought bankruptcy for five of its companies over the past decade leaving nearly $300 million owed to employee pension funds. And it’s not that Sun Capital’s ineptness was a great secret to those in the grocery industry; their ineptitude was known by many in the food biz. Along with another Florida-based PE firm Comvest Partners (whose reverse Midas touch was demonstrated by Haggen’s attempt to acquire divested Albertsons/Safeway stores), these two private equity firm represent worst in class…and could this possibly be the end of Sears? Well, not quite. As New York Bankruptcy Court Judge Robert Drain (he of A&P bankruptcy fame) waited in his White Plains, NY courtroom for Sears’ attorneys to propose a possible recovery plan for the bungling retailer, he agreed to let former Sears CEO “Slow” Eddie Lampert’s $4.4 billion bailout proposal to be considered. Judge Drain cautioned all parties that Lampert’s offer, which was first made on December 28, would serve only as a piece of a Sears asset auction which will begin on January 14. “Slow” Eddie’s revised plan calls for him to offer 50,000 jobs to Sears and Kmart employees while expecting to borrow an additional $1.3 billion. Attorneys and creditors are in a bind since there doesn’t appear to be any other offers on the table and the best route might be for Lampert to regain control (albeit limited) of the company he essentially destroyed over a 12-year period. Can’t this guy just go away?…kudos to our buddy, Dave Dulude, VP of independent retailer sales at Imperial Distributors, who retired at the end of 2018 after a lengthy and productive career at the Worcester, MA-based GM/HBC distributor. Dependable, always candid and quietly very funny, Dave’s impressive sales skills reminded me of those old school peddlers who met their customers fully prepared with a firm handshake and a keen understanding of their specific needs. We’ll miss Dave’s contributions to his company, his humor and generosity…several obits to report over the past month. Sad to report the passing of Milton Weinstein, who was Giant Food’s director of deli and dairy merchandising for many years. Milton joined giant in 1951 and became the youngest store manager in the chain at the time in 1959 when he was only 28. Milton was a kind and generous man, extremely intelligent and a bit of a prankster as noted by his daughter Terri, who told this story about her dad at his funeral: “Today I’d like to celebrate my Dad. Anyone that knew Milton or Uncle Milty knew that he was a quiet man, not loud, boisterous or assuming. But that quiet demeanor and that glint in his eye was the equivalent of a million words. Milton worked hard and certainly played hard. With every passion came the toys, from the pool hall, motorcycles, cars, especially the Thunderbirds, golf, tennis, boats and music. He took on every interest with intent and commitment. And he could relate to anyone from the professional executive to the pool shark with equal attention and respect. (And then there was) the wicked humor. When my son Nathan was about 3 or 4 years old Milton was encouraged not to teach him any songs because after any outing alone with Nathan, my son came home singing every inappropriate limerick instead of the typical children’s nursery rhymes.” Smart, funny and real mensch…also leaving us was Nancy Wilson, the great jazz singer. Wilson’s voice was flexible and soothing. She was able to belt out bluesy songs as well as jazz ballads and pop tunes. Wilson, 81, began her career in 1959 and retired in 2011. All, told, she recorded more than 60 albums including my favorite, “Nancy Wilson/Cannonball Adderley” (1961)…and “Super Dave Osborne” has also passed. “Super Dave,” the incredibly stupid stuntman whose exploits would often leave him injured, was really Bob Einstein, a talented writer and actor who literally was born into comedy – his father was radio comedian and writer Harry Einstein and his brother is Albert Einstein, who for some mysterious reason changed his last name to Brooks. Bob Einstein, who got his first break writing for the Smothers Brothers in late 1960s, most recently played the annoying but funny recurring character Mary Funkhouser in Larry David’s hilarious “Curb Your Enthusiasm” series. Einstein was 76.