Taking Stock

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‘Round The Trade

Ron Burkle has stepped down as chairman of A&P and will be replaced by board member Greg Mays whose ties to Burkle and his Yucaipa organization date back to his stints at Pathmark as a director and Wild Oats as CEO. Most recently, Mays was chief executive at Source Interlink, the publishing company that is also controlled by Burkle/Yucaipa. There have been several reports that A&P is starting to show improvement, but a recent eight-store tour of Super Fresh, A&P and Pathmark units in Pennsylvania, Delaware and New Jersey area certainly didn’t indicate that, as sales were mediocre at best, store conditions weren’t stellar and associate morale continued to be indifferent. A&P, which has been trying to peddle its 16 store Manhattan based Food Emporium unit since late last year without success, announced that it will sell and subsequently close two of those stores (2008 Broadway and 475 6th Avenue) to private equity investment real estate firm Madison Capital next month.That deal is part of a larger plan to sell and/or leaseback certain properties which the Montvale, NJ based retailer believes will generate about $130 million. Thus far, only four other units – Pathmarks in Clifton, NJ and the Inwood section of Manhattan and A&P units in Clifton, NJ and Briarcliff Manor, NY – have been affected, which has raised $25.8 million in proceeds to the Tea Company…big catch for Bozzuto’s in being named to supply the 17 store Bogopa/Food Bazaar group. And a tip of the hat to the whole Bozzuto’s gang for once again hosting one of the best regional trade shows in the business, and especially to CEO Michael Bozzuto’s continued philanthropic work. In addition to the company’s Dream Cruise motorcycle rally for Special Olympics, Michael was instrumental in raising money to buy a $75,000 Leica 3D camera, a new piece of technology that will aid law enforcement in mapping out crime scenes, which was sadly an important factor in the mass homicides that occurred on December 14 in Newtown, CT. During the Cheshire, CT based wholesaler’s “Retailer & Supplier Excellence Awards” dinner held at Foxwoods last month, Bozzuto called up many of the first responders from that horrible day in Newtown and thanked them personally for their efforts… on the earnings front, Springfield, NJ-based Village Super Markets, which is celebrating its 75th anniversary this year, posted flat profits ($9.10 million this year vs. $9.14 million in 2012) in its second quarter ended January 26. Overall sales at the 29 store ShopRite operator increased 5.4 percent to $382.2 million and same store revenue jumped a healthy 3.4 percent which the company said was because of “strong sales at several stores that reopened quickly after Hurricane Sandy” and improving sales at its two Maryland units…in Wal-Mart news, U.S. CEO Bill Simon said at a recent investors’ conference that the Behemoth’s smaller format stores are making headway against competitors such as dollar stores, pharmacies and supermarkets and will play an important role in Wal-Mart’s future. He added that this will be the busiest year ever for small format units (under 60,000 square feet) with approximately 115 new stores (under the Neighborhood Market or Wal-Mart Express banners) to open representing about 40 percent of the retailer’s total new store count in the U. S. (the big merchant will also open about 125 SuperCenters in 2013). By 2016, Simon expects Wal-Mart to operate about 500 Neighborhood Markets. An interesting story appeared earlier this month in the New York Times about Wal-Mart’s poor perception as a “fresh” retailer. Citing internal information gleaned from a meeting of top Wal-Mart managers held last month, the Behemoth’s consumer confidence level about its fresh produce was 48 percent compared to a 71 percent rating at Safeway. The Times piece added that Wal-Mart’s labor in its stores has also been reduced contributing to the problem (ah, that labor scheduling reduction – it always seems to ultimately bite retailers in the butt). Related to that was this gem from the manager’s meeting: “1 hour out of refrigeration = 1 day less of product life.” The truth of the matter is that, at end of the day, Wal-Mart’s price image at its SuperCenters remains its strongest magnet. The company can talk all it wants to about residual gains made by it “green” initiatives, its new format development or its “better citizen” image, but in the end what it does better than any other merchant is offer the lowest prices in a one-stop-shop box that ranges from 80,000-215,000 square feet. And in that regard, that’s plenty of might that trumps the world’s largest retailer’s many other shortcomings…Fairway Market, the unique New York City-based retailer, officially announced that it has raised $163.8 million in for its upcoming initial public offering (IPO) which should officially occur on April 16. According to its SEC filing, Fairway (with 12 stores and sales of $482.5 million) investors are offering 13.7 million shares in the $10-12 per share range. Fairway’s controlling equity partner, Sterling Investment Partners, would remain the retailer’s majority owner with a 33 percent stake. Fairway was founded in 1933 by the Glickberg family and grandson Howie Glickberg remains vice chairman of development. Last year, when the retailer announced its intention to go public, it projected an ultimate goal of 90 stores stretching from New England to Washington, DC. That remains a very lofty goal in my opinion based on given Fairway’s “New York centric” way of going to market. The company posted a net loss of $56.2 million for the 39 weeks period ended December 30, 2012. The new company will trade on NASDAQ under the symbol FWM. Also now officially going the IPO route is Blackhawk Network Holdings, Safeway’s gift card division, of which the big retailer holds a 96 percent stake. Blackhawk filed its offering with the SEC last month. The IPO should raise about $200 million and shares will be sold by existing shareholders. It will also be listed on NASDAQ under the symbol HAWK. Safeway still plans to keep a large stake in Blackhawk after the IPO. In 2012, Blackhawk posted net earnings of $50.3 million on sales of $949 million. More Safeway stuff: kudos to Bruce Everette, Safeway’s executive VP-retail operations, who is hangin’ ‘em up after a stellar 44 year career with the chain. I’ve known Bruce for many years (he began his career in the old Richmond division) and he’s one of the real good guys in our business. We wish him well in all his future endeavors. He will be replaced by Kelly Griffith, who most recently was Safeway’s president of merchandising…published reports indicate that Wegmans is very interested in opening a store in the city of Boston. The uber-retailer reportedly has its eyes on a location in the Landmark Center, a huge office and retail complex that it being redeveloped near Fenway Park… Supervalu isn’t the only private equity controlled firm that’s blowing up its management team and cutting employees. Lone Star Funds, which acquired Winn-Dixie late last year and already controlled Bi-Lo, has installed Anthea Jones, a 14 year veteran of the company, as the new president of its Greenville, SC unit, replacing the popular Michael Byars. And with the shift of headquarters to Jacksonville, FL, the combined entity has reportedly riffed 130 office jobs in Mauldin. The new corporate management team includes: CEO Randall Onstead (whose family founded Randall’s in Texas and has been associated with Lone Star since 2008); Mark Prestridge, executive VP- chief operations officer; Brian Carney, CFO; and Larry Stablein, chief merchandising officer. Prestridge worked with Onstead at Randall’s; Carney was previously Bi-Lo’s CFO; and Stablein was most recently senior VP-marketing & merchandising at Bi-Lo. Isn’t it funny how these grocery-driven PE deals usually result in a strong degree of cronyism?