Taking Stock

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‘Round The Trade

I’ve received several reports from Mid-Atlantic real estate executives who said that Lidl has put the brakes on many new projects, particularly in the state of Pennsylvania (excluding the Philadelphia area). Those sources tell us that many pending deals with real estate brokers have been terminated and that the opening dates for stores that Lidl owns have been delayed. Not surprising, since my most recent Lidl store trips have yielded more disappointing news, with often declining sales and eroding execution at store level, particularly in perishables. Moreover, the German discounter’s approach to general merchandise is baffling to me. Lambskin slippers for $19.99? On November 16, Lidl did open its first New Jersey store in Vineland, the same day it cut the ribbon on three other discount units, including one in Virginia Beach, which is now Lidl’s most heavily concentrated market with nine stores. Earlier this month, the privately-held German firm, whose U.S. headquarters are based in Arlington, VA, began its holiday season promotional program. That effort includes adding about 200 premium food and wine items and more than 300 gift items and holiday decorations…now that Walgreens has finally gotten the best Rite Aid deal that the FTC will allow, it announced late last month that it would be closing about 600 overlapping stores in the next 12-18 months. The majority of those stores will be Rite Aid units. The reasons are rather simple: with the soon-to-be-closed stores all within a mile of existing Walgreens, the FTC would not allow that level of overlap. Moreover, with Walgreens reporting negative comps of 2.1 percent in its recently completed fourth quarter, it certainly wouldn’t want that much cannibalization as it moves forward with a new corporate strategy…Supervalu has promoted Anne Dament from senior VP to executive VP for retail marketing and private brands. Dament, who joined Supervalu earlier this year, is a seasoned merchant having worked for Safeway, PetSmart and Target previously. You gotta wonder when Supervalu finally exits corporate retail if Dament, a Twin Cities native who began her industry career with Supervalu more than 25 years ago, will officially become the wholesaler’s chief merchant…reckoning day could come next year for beleaguered grocery merchant Southeastern Grocers (SEG), parent company of Winn-Dixie and Bi-Lo. According to a report issued by Moody’s earlier this month, the Jacksonville, FL-based chain faces two significant debt repayments, the first of which is due in September 2018 ($475 million in unsecured notes). Another repayment for $425 million in senior secured notes is due in February 2019, creating mounting pressure on the already struggling chain which is owned by Dallas, TX based private equity firm Lone Star Funds. Its $900 million credit facility, of which about nearly $300 million has been tapped, matures in November 2018 if any of the senior secured notes are outstanding at that time. Financially speaking, the company will have to restructure its debt or consider filing for Chapter 11 bankruptcy. Realistically speaking, both the Winn-Dixie and Bi-Lo brands (more than 700 supermarkets) have been under siege for more than a decade and Lone Star, which has been attached to the deal since 2005, has been trying to unload this albatross for years. However, while the company’s top line revenue has struggled since even before this millennium, the fat cats in Dallas haven’t personally suffered too much. According to its 2013 SEC filing, when the retailer unsuccessfully attempted to launch an IPO, SEG’s prospectus showed that of the $475 million debt issued in that same year, $458 million of that loan was used as a distribution to Lone Star. According to that filing, the retailer also distributed $76 million in 2011 and $305 million in 2012 to Loan Star…“Papa” John Schnatter, founder and CEO of Papa John’s pizza, wins this month’s “be careful what you wish for” award. The already overexposed pizza promoter criticized the National Football League and its players for protesting the national anthem which he claimed has dragged down pizza sales because of declining ratings. The fun began when Greg Creed, chief executive of Yum! Brands, which owns rival Pizza Hut, said his chain has not felt any impact on its pizza business and then DiGiorno, owned by Nestle, responded on Twitter by exclaiming “Better Pizza. Better Sales. It’s DiGiorno.” That was a clear spoof of Papa John’s tag line – “Better Ingredients. Better Pizza. Papa John’s.” Papa John’s took the bait and countered with “Frozen pizza = equivalent of a participation trophy,” which was later changed to “Better Ingredients. Better Pizza. Better Tweets.” Just before presstime, Schnatter back off even further, when noting that while he believes that Americans’ should honor the national anthem, he supports the players’ movement to create a new platform for change. As for his Twitter battle with DiGiorno’s, I would disagree with two of those statements from Papa John’s, giving the nod to DiGiorno’s for having the better tweets and the better pizza.