Taking Stock

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Weis Moving On From Hepfinger, Who Helped Change Culture, Direction 

Dave Hepfinger is gone, now it’s time to move on and continue to execute our agenda. While nobody at Weis used those exact words, that chord was very resonant at the retailer’s fourth annual vendor summit held earlier this month in Baltimore.

Interim CEO and vice chairman Jonathan Weis termed Hepfinger “strong willed” and wished him well in his future pursuits; the youthful executive also noted that “more importantly, this opens up for us what is almost a generational shift in continuing leadership.”

Yet the vibe I got at the vendor summit resembled a chapter from a Russian textbook: Hepfinger seemed to have been purged from the historical record at the regional chain, despite a five year run at the retailer as president and COO beginning 2008 in and as CEO and president since 2009.

The backroom chatter had been increasing in volume over the past six months about Hepfinger’s perceived changing behavior and attitude, so when Weis announced on September 23 that it was changing leadership, I wasn’t shocked.

And I’m not disputing the criticisms of current and former associates who claim that during the past 18 months Hepfinger’s sometimes temperamental, sometimes aloof personality adversely impacted his effectiveness as the chief executive. I never worked for Dave, so my perspective is much different.

Although the ending may not have been the way Dave or Jonathan Weis would have scripted it when Dave joined Weis after a 32-year career at a similarly-styled regional chain (Price Chopper), based on his entire body of work at the Sunbury, PA retailer, Dave Hepfinger helped turn around Weis Markets from a middle-of-the pack regional chain with a staid culture, many outdated stores and even more outmoded information technology to a company that has become much more competitive with upgraded talent, vastly improved IT and analytics, and new stores that are fresh and modern.

While Weis’ earnings have remained solid, recent sales numbers haven’t reflected those improvements as Weis has faced many of the same challenges as other supermarket operators – a still lagging economy (creating cautious consumer spending) and fierce and diverse competition.

Beyond that, for the past 18 months Weis has been cycling against some strong numbers achieved in 2010 and 2011. And it’s probably a fair criticism to note that Weis’ attempt to expand into newer, larger markets (Philadelphia, Western New Jersey) with new stores has been disappointing thus far.

But again, let’s analyze the complete body of work. When Hepfinger was first named CEO in January 2009, Weis’ stock was trading at approximately $32 per share; the day he exited, the company’s common stock was valued at $50.38 per share. When Hepfinger arrived at Weis from Price Chopper, the retailer was spending about $80 million annually

on cap-ex, not enough to be competitive in terms of building new stores, significantly remodeling many others and utilizing the depth of technology that its competitors were applying (especially after years of not properly reinvesting in its stores and infrastructure). Each year since, cap-ex has been increased, reaching a record $130 million this year. And while the Weis workforce was loyal and hard-working, there was little vision offered because the retailer seldom brought in younger, more innovative executives who could bring new ideas to the table. Not only did Hepfinger recruit new talent, he emphasized the fundamentals and prioritized Weis’ “fresh” business.

There were intangibles beyond the culture change, too, that were positive. Other retailers for the first time in many years took notice of Weis’ improvements. The regional chain was now being watched much more closely by its primary competitors – Giant/Carlisle and Wal-Mart. And the vendor community recognized that a trip to Sunbury was no longer a mundane pit stop, but an opportunity to introduce new items and have them promoted aggressively. There was truly a sizzle and enthusiasm that sales reps and brokers hadn’t felt in many years.

I chatted briefly with Dave following his departure. Despite the abrupt ending, he left without bitterness, noting that his tenure at Weis was “a good run.” He plans to take it easy for a few months at his North Carolina vacation home and then ponder his future. He certainly has a lot left in his tank, but he is financially comfortable, and at age 55, may not want to venture back into the battlefield that this business has become.

As for Weis’ next permanent chief executive, I think the company may take some time before naming Jonathan Weis’ replacement. Kurt Schertle remains the industry favorite for the CEO post, but it’s logical that you might first see Kurt become COO. At age 42, he is certainly ready for the challenge. Kurt is extremely bright, very talented and despite his young age, has the maturity and leadership skills to be the everyday commander. He is also widely respected and admired by Weis’ associates and the vendor community and his name is certainly on the short list of companies looking for new chief executive officers. While Kurt may be the day-to-day cornerstone of the current leadership team, Jonathan Weis should also be given much credit for helping build the strong management group that’s in place today.