Taking Stock

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 ‘Round The Trade

More Amazon news: The big Seattle juggernaut will reportedly open its first fulfillment center in New York State. The new one million square foot DC, which will be based on the west shore of Staten Island (two miles from the Goethals Bridge), could open by the end of the year and serve Amazon shoppers in the five boroughs, Long Island and the lower Hudson Valley of the Empire State… Wawa will enter a new marketing area when its cuts the ribbon on its first Washington, DC in December 2017. Its first District store will unveil a new footprint – it will be the Wawa, PA-based firm’s largest store to date at 9,200 square feet and it won’t sell gas. Wawa noted that it is looking to build as many as 10 new DC stores in the next three years…Kroger reported its first quarter earnings and sales, and the big Cincinnati retailer continued its recent trend of slightly declining ID sales (negative 0.2 percent excluding fuel) while also posting a 21.6 percent drop in earnings. However, the report was hardly one of doom and gloom. Overall revenue rose 4.9 percent to $36.3 billion, and adjusted net profits were still a healthy $546 million. Kroger’s biggest issues over the past 12 months have been deflation, a heightening of overall market competitiveness (especially from Wal-Mart) and unrealistic financial market pressures to maintain the tremendous track record the big chain achieved for more than a decade. I believe CEO chairman Rodney McMullen summarized Kroger’s current situation accurately when he stated: “We remain focused on our strategy. This will make a difference for our customers and create value for our shareholders. We are running the business with an eye toward where the customer is going. Customers tell us they want to connect with us in multiple ways with the help of friendly associates to easily provide meals to their families at prices that enable them to stretch their budgets. We are committed to providing that experience, and we will not lose on price. We are driving our strategy of lowering costs to reinvest in ways that provide the right value to our customers. We’re pleased that identical supermarket sales in the last nine weeks of the first quarter were positive, and that has continued in the second quarter to date.” Unlike some other jumbo chains in the supermarket and other channels, Kroger has a diversified strategy to build sales and, as importantly, has the talent and culture to overcome these short-term hiccups…one such merchant whose issues I don’t believe are short term is aforementioned Whole Foods Market (WFM), which recently learned that a Federal Appeals Court in New York overruled a lower court judgment and the company will now have to face a potential class-action lawsuit accusing the natural and organic retailer of overcharging Big Apple shoppers by overstating the weight of certain prepackaged foods in its New York City stores in 2015. A little further south, the Austin, TX based merchant is in a nasty fight with its landlord, Wical LP, over rodent and bug infestation at its unit at 2323 Wisconsin Avenue, NW in the District. That store has been closed since mid-March after the DC Department of Health found problems with insects, rodents and other pests. The dispute heated up after Wical sent a letter to Whole Foods last month allegedly claiming that the retailer was in default of its lease, which Wical claims prohibits the store from closing for more than 60 days during any three-year period. WFM’s suit says that the landlord’s intentions are to “strong-arm Whole Foods into paying additional rent and committing to a longer term (lease).”…another retailer in the “challenged” category is Sears – actually, they are more than challenged, they’re almost brain dead. Earlier this month, the inept retailer announced that it would close 72 more stores (16 Sears, 49 Kmarts and seven Auto Centers). That’s in addition to the 180 stores that the Hoffman Estates, IL-firm already said it would close in 2017. Seventeen of those stores are in the Northeast including four in New Jersey (one Sears, three Kmarts); four in New York (all Kmarts); three in Virginia (one Sears, two Kmarts); one in Maryland (one Kmart); three in Pennsylvania (all Kmarts); one in Massachusetts (one Kmart) and one in West Virginia (one Kmart) …Mike Witynski has added the title of president of Dollar Tree stores. Many in the trade remember Witynski from his years at Supervalu before he joined the Chesapeake, VA discounter in 2010. He was promoted to COO in 2015 and will now oversee merchandising, marketing and store ops at approximately 6,200 stores…yahoo, buckaroos! Earlier this month Wal-Mart renewed its annual tradition of bringing big-name entertainers to its annual shareholders meeting, which again was held at the Bud Walton Arena at the University of Arkansas in Fayetteville. Once Rascal Flatts and (in a private concert for associates only) Sheryl Crow performed, CEO Doug McMillon got down to real business in discussing what was one of Wal-Mart’s best years in the last decade. “Together, we’re building a new Wal-Mart,” the youthful chief executive told the sold out house. “We’re going to make shopping with us faster, easier and more enjoyable. We’ll do more than save our customers. And, you, our associates, will make the difference. Looking ahead, we will compete with technology, but win with people. We will be people-led and tech-empowered.” Among the new digital-driven programs being tested by the Behemoth are online orders being delivered directly to customers by Wal-Mart associates (bad idea); digital “endless-aisles” shopping in stores; automatic pickup towers in stores for online orders; pickup stations in store parking lots; and robotics and image analytics to scan aisles for item availability and shelf presentation. McMillon also noted initiatives designed to create a better experience for associates and shoppers. Those include free two-day shipping on more than two million items with no membership fee; a discount for customers picking up online orders in stores (click & collect) and implementation of its new Jet Fresh delivery, which provides delivery of fresh groceries in one-two days which is now available to half the U.S. population and is expanding its geographic reach. And speaking about Wal-Mart’s newest prized possession, jet.com, that Internet delivery unit will no longer carry any products from Costco’s Kirkland Signature brand. About 230 Kirkland Signature items could previously be found on jet.com’s website. But with Wal-Mart and Costco now seen as high volume retail rivals, it’s not surprising that this type of cross-selling would not exist in the long-term. According to published analytics data, jet.com accounted for 5.5 percent of Kirkland’s online sales in the first half of 2016…amid all of the hype surrounding the debut of Lidl in the U.S., you may have missed the news that supermodel Heidi Klum has inked a deal with the German discounter in which it will carry an exclusive apparel line under Klum’s name. While there is certainly a German connection between Klum and Lidl, I never thought I would use the words “supermodel” and “discounter” in the same sentence.