Taking Stock

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‘Round The Trade

It looks like there’s more management turnover at Lidl. Earlier this month, CEO Jesper Hojer resigned after a two-year tour of duty. Ignazio Paterno, deputy purchasing director at the Neckarsulm, Germany discounter and former chief exec at Lidl’s Italian division, will head the company on a “provisional” basis. In late March, Patrick Kaudewitz, who was CEO of parent firm Schwarz Group’s conventional supermarket chain, Kaufland, also resigned. That follows several changes in the U.S. over the past few years. When the company first announced plans to enter the U.S. in 2014 it named Kenneth McGrath as its CEO. He stayed about a year, and after leaving the grocery business for a short spell, is now chief executive at rival Save-A-Lot. Replacing McGrath in 2016 was Brendan Proctor, who stuck around long enough to open the first batch of disappointing Lidl stores in the U.S. He was replaced nearly a year ago by Johannes Fieber, another Lidl European import who remains on the job today. In February, Lidl bolstered its local management by adding company veteran Roman Heini as U.S. chairman. And at Heini’s hidey-hole, its corporate headquarters on S. Clark Street in Arlington, VA, Lidl has carved out about 1,000 square feet of space to operate its own convenience store – Lidl Express – that is open to the public, but it is expected to primarily serve Lidl associates who work in the high-rise building. The small unit carries typical c-store items as well as some fresh bakery, produce, prepared foods and beer and wine…in what is somewhat of a rarity, ShopRite is closing a store. Collins Family Markets, which operates the Glen Burnie, MD ShopRite (and four other SRs in Philadelphia), will shut its doors in the Old Line State late next month. The store, a former Kmart, opened in 2010. The company said on its Facebook page “We have been unable to reach a sustainable level of sales and have decided to close.”…April 5 was a busy day for Giant/Martin’s as it reopened the five former Shop ‘n Save stores it acquired from UNFI late last year. The stores are located in Smithsburg, MD; Greencastle, PA; Berryville, VA; Hedgesville, WV; and Martinsburg, WV. Also debuting that day was a new Giant unit in Warrington, PA (a former Redner’s store) which replaces another older, smaller Giant unit located in nearby Jamison, PA…and speaking of Redner’s, the Reading, PA-based regional chain will cut the ribbon later this month on its first “fresh market” at the site of its still open conventional store on Berkshire Boulevard in Wyomissing, PA…Weis Markets, which competes with both Giant and Redner’s, achieved record company sales of more than $3.5 billion for the 52-week period ended December 29, 2018, up 1.2 percent compared to the same period a year ago, while annual comparable store sales increased 0.7 percent. Income from operations rose $7.2 million, or 9.4 percent to $83.6 million compared to $76.4 million for the same period in 2017. The Sunbury, PA-based merchant’s annual and fourth quarter net income comparisons were impacted by the federal government’s implementation of the Tax Cuts and Jobs Act (tax reform) in 2017. Weis said it realized a $49.3 million decrease in its deferred income tax due to this legislation, which improved net income in both its 2017 and fourth quarter results. The current annual results contain no such benefit. Annual net income totaled $62.7 million (-36.3 percent) compared to $98.4 million in 2017. Annual earnings per share totaled $2.33 compared to $3.66 per share in 2017. “We made significant forward progress in 2018 by driving sales, investing in our store base and information technology and by improving store-level efficiencies,” said Weis Markets chairman and CEO Jonathan Weis. “The result was a 9.4 percent increase in annual operating income and increased comparable store sales in 2018. During the year, we also expanded online ordering with in-store pickup and home delivery to 173 stores which resulted in more than 100,000 orders and a 33.2 percent increase in online sales.” During the 13-week period, the closely-controlled regional chain’s sales increased 1.0 percent to $892.9 million compared to the same period in 2017, while fourth quarter comparable store sales increased 0.9 percent. Income from operations in the fourth quarter totaled $17.2 million compared to $22.3 million in the same period in 2017 and Weis’ Q4 net income declined 79.2 percent to $13.2 million compared to $63.7 million in 2017, while earnings per share totaled $0.49 compared to $2.37 per share for the same period in 2017…another company that competes with all three retailers in Central PA – Grocery Outlet – has filed to launch an IPO. The Emeryville, CA based discounter operates 20 stores in the Keystone State and operates more than 300 units in all (mostly on the West Coast) with sales of more than $2 billion. Founded in 1946, the former family-owned merchant was first acquired by Berkshire Partners and then sold to another PE firm Hellman & Friedman in 2014. Most of its stores are owned by independent licensees…Whole Foods has reduced prices on more than 500 items and parent company Amazon has expanded grocery deals for its Prime members as part of the discount program. Many of the items are in produce and meat, but after the last round of cuts, I’m skeptical since the price reductions were more flash than substance. And in our price checking research over the past year, nobody has raised prices more than WFM has (although to be fair, with inflation, virtually all retailers have raised their everyday retails). We’ll get out our comparative price book and let you know if this round of reductions is actually more filling and taste great. And if Amazon has big plans for any form of bricks and mortar retailing, they might have to rethink their plans about entering City of Philadelphia and the state of New Jersey, which officially banned cashless stores within their jurisdictions…if you’re wondering why the hype over meal kits has waned significantly, all you need to know are a few recent tidbits. First, Albertsons recently announced that it is cutting the number of stores where its Plated meal kits are available and will now only be marketing them in select stores. Albertsons acquired Plated 18 months ago and in the past few months both co-founders have left the supermarket chain. And Blue Apron, which helped fan the meal kit mania by going public nearly two years ago, has another new CEO, Linda Kozlowski, after former chief executive Bradley Dickerson resigned early this month. Blue Apron, which fizzled from the outset, was trading at a whopping $1.04 per share at the close of business on April 3…part of virtually every discussion I have with retailers about the current state of their businesses seems to focus on how the overstoring glut isn’t shrinking. Now comes word from JLL’s Grocery Tracker that new food store openings (all formats) increased nearly 30 percent last year with more than 17 million square feet in retail space added nationally…Ocado, the British e-commerce distribution company that has aligned itself with Kroger in the U.S. and Sobey’s in Canada, will establish its first American office in Washington, DC. While it searches for a permanent residence in the District, it will operate out of temporary digs in Tysons Corner, VA beginning later this month…just when you thought we were heading for quiet period for the “Slow” Eddie Lampert watch, the former and (weirdly) current CEO of Sears Holdings has been accused of “lifting” $57.5 million from several Sears bank accounts in the final days before Lampert closed his $5.2 billion deal to create a new and significantly downsized organization still under the control of another Lampert company – Transform Holdings. Creditors are fuming over this and U.S. Bankruptcy Judge Robert Drain strongly advised the worst retailer of his generation to return the funds. An April 18 hearing will settle the matter. Additionally, Sears has confirmed it will open new smaller specialty format stores that will focus on home goods (like appliances, tools and mattresses – no apparel) called Sears Home & Life (not to be confused with House of Death). The first three stores will open in late May in the merchandising hot spots of Lafayette, LA; Overland Park, KS; and Anchorage, AK…we have a several obituaries to report this month including the passing of Kelly Tobin, daughter of Bob and Audrey Tobin. Bob is the former CEO of Ahold USA and one of the finest people to ever serve the grocery industry. I’m very sorry for their loss…two music industry unsung greats have also left us. Hal Blaine, the literal foundation of the LA session stable of musicians known as The Wrecking Crew, has died at age 90. Simply said, Blaine was one of the greatest drummers in pop and rock history, playing on 35,000 records (that’s not a typo) mainly in the 60s and 70s (including 40 number one hits and 150 top 10 songs). He was closely associated with Beach Boys leader Brian Wilson – listen to his subtle work on the song “Good Vibrations” – and was a vital part of that group’s success in the 1960s. And here’s a piece of trivia that will never be equaled. Blaine was the only drummer to ever back Elvis Presley, Frank Sinatra and John Lennon…another great musician has also left us. Dick Dale, the guitar player who pioneered surf music in the early 1960s, has died at the age of 81. Armed with a Fender Stratocaster and an array of customized amps and speakers, Dale perfected a sound that had peaked by the mid-60s, but saw a resurgence 30 years later after Quentin Tarantino used Dale’s version of “Misirlou” in the opening credits of his iconic film – “Pulp Fiction (1994).” Despite many health problems, Dale continued to tour until early this year…Clem Daniels, 83, has also passed. Now you have to go back, way back in the sports annals to remember Daniels. But if you’re a football fan over the age of 60, you might remember the Prairie View A&M alum as an excellent running back for the Oakland Raiders dynasty teams of the old American Football League. And if you dug a little deeper, you’d find that Daniels was a four-time Pro Bowl selection who played seven seasons for the Raiders (1961-1967, which included an AFL championship in ’67). And before the 1970 AFL-NFL merger, Clem Daniels held a record which will never be broken, most career rushing yards – 5,103 – in the history of the AFL…hard to believe that my friend Andy Klein is dead. Klein, 65, president and CEO of nine-store Klein’s ShopRite group, was tragically killed last month when a ShopRite truck driver, on the way to make a delivery at one of Klein’s stores in Bel Air, MD, lost control of the vehicle and collided with 12 other cars, including Klein’s. Klein’s car was pinned under the truck, which caught fire. A seven-year old boy was also killed. This is a real tragedy for the Klein family who have been in the food retailing business in Harford County since 1925. I’ve known the family for more than 40 years, including Andy’s late parents Ralph and Shirley Klein and his brothers, Howard and Michael. Andy Klein also leaves his wonderful wife Jayne and three great children Marshall, Rachel and Sarah. Fourth generation siblings Marshall and Sarah remain active in the business. A man with a big heart with a great sense of family and community, I’ll miss Andy Klein.