Taking Stock

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‘Round The Trade

And speaking of Kroger (and Hampton Roads), the chain’s first step of its five year $250 million market upgrade plan for the region (it now operates 10 units in the Tidewater area of Virginia) was a grand-slam. A 124,000 square foot Marketplace recently opened in Virginia Beach (on the site of a former SuperKmart unit) and sales have reportedly topped the one million dollar a week barrier for the past month (that’s better than the first Virginia Marketplace, which opened in ChesterfieldCounty last December). Kroger also has other combo Marketplace units slated for Portsmouth and Suffolk, with more new store announcements expected soon…perhaps the presence of Kroger in its backyard was the catalyst to replace Bill Parker as president of Farm Fresh, which has struggled since Ron Dennis left the regional unit of Supervalu in 2010 (in the musical chairs department, Dennis was replaced by ex-Food Lion executive Gaelo de la Fuente who left Supervalu last year). Although Parker (who is a real good guy) did once toil for Albertsons, he’s really a holdover from the old Ron Dennis regime and not a hand-picked choice of Bob Miller who is now supervising the entire Supervalu and New Albertsons businesses under the aegis of private equity owner Cerberus Capital (many of those two firms’ senior executives worked directly for Miller when he was at Albertsons). Parker’s replacement on an interim basis is Chad Ferguson, an ex-Kroger exec who came on board at Supervalu shortly after the Cerberus/Bob Miller/Sam Duncan team gained control last March. So, while there has been some improvement with the new leadership team, the numbers at Supervalu’s regional chains, which also includes Shoppers, Cub, Shop ‘n Save and Hornbacher’s, are still in “struggle mode.” (I found it interesting that the only two division presidents to exit the “new” Supervalu were the ones least connected to Miller – Shoppers’ president Bob Bly in July and Parker last month). Clearly, there’s too much competition in most of the areas where SVU and New Albertsons operate, and so much toothpaste was squeezed from the tube under the wretched tenures of Jeff Noddle and Craig Herkert that it’s going to be very, very hard to gain significant sales increases over the next few deals. But, then again, this deal really isn’t about long-term market share success is it? With a strong real estate base now under its control and knowledgeable grocery leaders to streamline the “process,” Supervalu, with its increased share price and fixed supermarket assets and New Albertsons (Acme, Shaw’s, Jewel and two West Coast Albertsons divisions) with even a stronger real estate portfolio, have already achieved success for their financial partner…more Virginia news: Martin’s (Giant/Carlisle) will close its older and smallish Gayton Crossing unit in Richmond next month. Citing performance issues, the retailer said that a majority of the fewer than 100 associates would be offered jobs at other nearby stores. Next year, Martin’s will open its first new Richmond area store since it acquired Ukrop’s in 2010 in Midlothian (the 74,000 square-foot unit will serve as a replacement for its in the Sycamore Square Shopping Center store that opened in 1975)…Dollar Tree, the fastest-growing dollar store retailer in the country, announced that it will add freezers and refrigerated units to 550 of its stores over the next 12 months, which will give the Chesapeake based discounter more than 3,400 of its nearly 5,000 units, enabling them to be equipped for perishables. To give you an idea of Dollar Tree’s recent explosive growth, during its second quarter ended August 3, earnings increased $4.6 percent to $124.7 million while comp store sales grew 3.7 percent. During that 13 week period, the company opened 81 new stores. These numbers are not an anomaly; Dollar Tree has been on a spectacular growth run for the past five years…in Roanoke, members of United Food and Commercial Workers (UFCW) Local 400 working at the Mid-Atlantic division’s Kroger stores have ratified a new, three-year collective bargaining agreement. “This agreement is as good as any in the country,” said Local 400 president Mark P. Federici. “Despite the damaging impact of the Affordable Care Act (Obamacare) on the joint labor-management’s Taft-Hartley Funds providing health care to our members, we were able to maintain current benefits. And despite the still-struggling economy, we were able to negotiate actual raises and bonuses. Our members deserve all the credit for this strong contract, because their solidarity and activism is what made everything possible.” The union commented that bargaining was challenging and protracted, largely because Obama administration regulations covering implementation of the Affordable Care Act deny Taft-Hartley Funds any of the benefits of the new law while imposing major new burdens. As a result, the previous contract, which expired on March 31, 2013, has  been extended for five months, though many other negotiations in the grocery industry have required extensions lasting a year or longer. Highlights of the new agreement include: increases in total compensation of nearly $2/hour over the life of the contract including wages and employer contributions to the health and retirement funds, plus bonuses; maintenance of health and retirement benefits for current employees; expansion of job classifications that increase the number of lead positions, creating new paths for career advancement and increases in earnings and defeat of numerous management proposals for worker concessions. “I couldn’t be more pleased that our Kroger Roanoke members will be able to work for the next three years under an industry-leading collective bargaining agreement that empowers them to continue improving their lives,” Federici added. Local 400, the largest UFCW local, represents 35,000 workers in the retail food, retail, health care, manufacturing and other sectors in Virginia, Maryland, Washington, DC, West Virginia, Ohio, Kentucky and Tennessee. In other United Food and Commercial Workers news, the UFCW International is reaffiliating with the AFL-CIO after an eight-year break with the national labor federation. “We join the AFL-CIO because it is the right thing to do for UFCW members, giving them more power and influence,” said UFCW president Joe Hansen. “This is not about which building in Washington, DC we call home – it is about fostering more opportunities for workers to have a true voice on the job. Attacks on workers brought the UFCW into direct strategic partnership with the AFL-CIO and made it clear it was time for the UFCW to redouble our efforts to build a more robust and unified labor movement.…heading a bit further south, Publix has confirmed it will build new stores in Winston-Salem and Cornelius, NC. Both stores will open in the next 18 months to go along with five other Tar Heel state units currently under construction in Charlotte (three locations  – Ballantyne, Iverson Way and Matthews Mint Hill Road), Cary and Asheville. The two newest locations that were announced last month will each be 49,000 square feet in size. And as Publix continues to develop its new Charlotte division, and Kroger awaits the FTC go-ahead on its Harris Teeter acquisition, Lowes Foods (a unit of Alex Lee, Inc.) has closed two Triangle region stores in Cary and Raleigh… great move by Newark, DE-based Produce Marketing Association (PMA) last month when it hired ex-Food Lion president Cathy Green Burns as its new president. She will report to PMA CEO Bryan Silbermann as the growing trade organization seeks to continue the dynamic growth it has achieved over the past decade…at Wal-Mart, second quarter comps were down 0.3 percent at its U.S. stores. The company said the dip in same-store revenue resulted from low inflation and some price deflation in categories like dry groceries, snacks and frozens. Bill Simon, CEO of Wal-MartU.S., noted that trading down was also a factor, “…particularly in the categories where product loyalty is not the primary factor in a purchase decision.” Simon added that increases in produce comps were in the mid-single digits and that the positive effects of an internal program to improve employee training also aided sales through the 13 week period…the National Frozen and Refrigerated Association has named its March Frozen Food ‘Golden Penguin” winners. Among those in our region who were recognized were: Wakefern Food Corp. (co-op wholesaler); Bozzuto’s (corporate wholesaler); Ateeco Inc./Mrs. T’s Pierogies (branded manufacturer); Acosta (military sales agent); Douglas Sales Assoc. (retail sales agent); Weis Markets, assisted by Crane Communications Inc., (retail corporate chain or division over 50 stores)…also Shaw’s (now part of the Cerberus network) announced that another round of store closings. The West Bridgewater, MA chain is shuttering six of its 34 units in New Hampshire – Seabrook, Goffstown, Tilton, West Lebanon, Manchester and Keene. A week later Stop & Shop (Ahold USA) said it would close its fleet of six stores in the land of “live free or die” – Hudson, Exeter, Bedford, Milford and two Manchester stores…I’m sure many of you read the Bloomberg piece on C&S chairman Rick Cohen. Not only was the story interesting, but it revealed a lot about the “mystery” behind one of the most innovative and successful executives, not only in the grocery business but in the world. Among the nuggets in the story: Cohen’s net worth is $11.2 billion, making him one of the 100 wealthiest people in the world; as the owner of a privately-held firm, Cohen lets C&S’ corporate income pass through to be taxed as personal income to avoid double taxations; and in 2009 (based on Bloomberg research) the Keene, NH wholesaler had approximately $240 million in outstanding bonds and achieved a gross profit margin of 2.2 percent on net income of $19.3 billion. Bloomberg estimated C&S’ current annual volume to be $21.7 billion. I’ve probably gotten about 50 phone calls and emails about this story, but one person I’m certain I won’t be hearing from is Rick. That’s because he is one of the most private, low-key executives in the grocery business, and one who doesn’t grant interviews and doesn’t make many public appearances (unless it’s customer-related or for a philanthropic cause). Despite the flattering remarks in the story, I can’t believe Rick’s happy about all the new publicity…the National Grocers Association (NGA) in conjunction with Pasadena, MD-based FMS, has released its 2013 Independent Grocers Financial Survey. Some of the other nuggets from the report include: improvement on net profit in 2012 compared to 2011 – from 1.12 percent to 1.65 percent; inflation-adjusted increases in overall comp store revenue to an average of 1.46 percent; total store margins gained slightly to 26.48 percent; and healthcare costs continued to spiral upward, increasing 7.6 percent over 2012 levels. The survey found that the economy continued to improve and that lower unemployment proved to be a positive factor in gains made by the more than 250 independent retailers surveyed.  “Fiscal year 2012 was quite the comeback year for independent food retailers,” said Peter Larkin, president and CEO of NGA. “We found vast improvements in financial performance, much higher levels of store development, stabilized payroll and lower levels of theft-related shrink for the majority of respondents.”…Dietz & Watson, the iconic Philadelphia-based deli manufacturer, had to swallow some tough news over the long Labor Day weekend. Its 266,000 square foot primary distribution center in Delanco, NJ was burned beyond repair. This was no ordinary fire, but a blaze of mammoth size – 11 alarms were rung in which about 50 neighboring fire companies were called in and involved approximately 200 firefighters. Fortunately, nobody was hurt at the depot which was built in 2007 and employs 130 people, all of whom have all been moved to other D&W facilities, primarily to the main plant on Tacony Street in Philadelphia. The cause of the fire is as yet undetermined. Louis Eni, CEO of Dietz & Watson and one of the classiest people in any business, expressed concern about the safety of his people and expressed his gratitude to the firefighters who fought the big blaze, which originally broke out on Sunday, September 1 at 1:30 p.m. and wasn’t contained for more than 24 hours. Eni noted: “We will absolutely have to rebuild. The Delanco facility was the main warehouse for D&W and it also housed a third party logistics cold storage facility. That has also been destroyed. The office was not destroyed, so they are salvaging paperwork, computers, etc. and bringing them back to Philadelphia.  The entire company has stepped up to the plate and everyone is working together to keep the company going. What is most important now is to get a sense of normalcy back. We are working 24/7 until we get all inventory levels back to normal.” He added that “the outpouring of support has been incredible from all sectors of the industry.” From a trade perspective, Dietz & Watson shipped its first order on Tuesday morning, September 3. The Philly driver/salesmen/jobbers were also on the street on September 3 with product serving customers. In addition, all tractor/trailers are being loaded from the main plant in Philadelphia.  The West Coast shipments went out just before the Labor Day holiday and they were heavier than usual (due to holiday demand), and the intention was to ship to the West Coast again closer to the weekend of September 7-8. The company’s manufacturing plant in Baltimore and its Greenville, SC warehouse are being used as satellite distribution centers.