Taking Stock

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‘Round The Trade 

Kroger has named 38-year veteran Mike Ellis president and COO effective January 1, 2014. Ellis will assume the post held by Rodney McMullen, who will replace retiring Dave Dillon as CEO. Ellis, 55, is currently senior VP of Kroger’s retail divisions. Just before presstime, Kroger held its annual “investor day” in New York. Key takeaways from the meeting included the big Cincinnati chain’s desire to accelerate its “fill-in” strategy by adding stores in both existing markets and newer areas (think Baltimore-Washington market after the Harris Teeter deal gains FTC authorization). Outgoing chief executive Dillon noted that while market adjacencies are important, Harris Teeter would have been a prime acquisition candidate no matter where it operated because of strong management, a reputable name in its markets and an established infrastructure. Dillon also inferred that the Internet won’t be as dominant in food purchasing as some analysts believe. “I wouldn’t be too quick to assume that the leap to home delivery ends up replacing everything,” he noted, adding that there remains a large percentage of customers that like to get out and have interaction with friends and neighbors in their community as they walk through the store…well as it turns out, the Delhaize Group is actually looking for a U.S. CEO to replace Roland Smith who resigned in September after Frans Muller was named group chief executive. Also resigning, effective October 31, was Stefan Descheemaeker who presided over Delhaize’s European operation. As for the currently vacant Delhaize America (DA) job, whoever gets that post will certainly earn whatever compensation they agree to. With its core Food Lion unit still struggling (yes, there’s been some improvement, but not enough to make a discernible difference) and its Bottom Dollar Foods discount banner still posting red ink, you have to wonder how much shelf life remains for its U.S. stores. One of the better moves that DA made under the short reign of Smith was dumping its Sweetbay, Harveys and Reid’s banners to Bi-Lo Holdings (165 units were sold at the ridiculously discounted price of $265,000). Now Bi-Lo’s parent firm, run by veteran grocery executive Randall Onstead and part of private equity firm Lone Star Funds (which got into the supermarket acquisition game in 2005 with the purchase of Bi-Lo and Bruno’s from Ahold, also acquired Winn-Dixie in 2011 and recently bought 22 Piggly Wiggly units ), has filed with the SEC to go the IPO route. The name of the new entity will be Southeastern Grocers and it is looking to raise $500 million for the public offering. Separate but related news is that Bi-Lo will retire the Sweetbay and Reid’s names and convert the former chain to the Winn-Dixie banner and the latter group to the Bi-Lo banner. Harveys Supermarkets, with 73 stores in Georgia, Florida and South Carolina, will retain its name. So with Bi-Lo’s newly added Piggly Wiggly stores and Harris Teeter adding 12 units formerly owned by “The Pig,” the Charleston, SC market is shaping up as a new battleground between the two firms, which already compete against each other in the Carolinas. I haven’t seen the refurbished Bi-Lo units, but I can tell you that HT is spending mucho dinero on its Charleston expansion…now that U.S. Bankruptcy Judge Kevin J. Carrey has granted court approval for a November 19 auction, it looks like the path has been cleared for Yucaipa Cos. to officially bid on about 150 Fresh & Easy stores on the West Coast that current owner Tesco seeks to dispose of. As per Carrey’s ruling, made last month in Wilmington, DE, all potential buyers must submit offers by November 15. The company would hold the auction only if it receives a competing qualifying bid. If that happens, a hearing on November 21, would determine the auction winner…remember Hank Mullany, ex-Genuardi’s president, who also headed Wal-Mart’s Northeast business and later served as CEO of ServiceMaster? Mullany has a new job as president of Toys “R” Us, where he will oversee all U.S. merchandising, marketing, e-commerce and store ops for the struggling 878 store toy firm which is based in Wayne, NJ, not too far from his Philadelphia roots…at its annual investor conference held in Bentonville, AR, Wal-Mart said it expects earnings this year to fall in the 1.9-3 percent range compared to the five percent earnings increase it achieved last year. Moving forward, the Behemoth also said it plans to reduce its cap-ex in fiscal 2015 by approximately $200 million (to between $11.8-$12.8 billion). “We’re spending in a disciplined manner by setting up a more streamlined real-estate process,” Mike Duke, president and CEO, stated. “As we continue to improve our sales per square foot, Wal-Mart will continue to grow through new stores and e-commerce while expanding our logistics and fulfillment network in critical markets.” The world’s largest retailer said it plans to open 115 supercenters in fiscal 2015, compared with 125 this year; and will also accelerate the growth of small-format stores, mostly Neighborhood Markets, projecting between 120 and 150 next year, compared with 120 this year. According to Bill Simon, president and CEO of Wal-Mart U.S., “We will accelerate growth of our Neighborhood Markets because of their strong returns, consistent comp-sales performance and double-digit net sales increases; and we will continue to build and leverage the supercenter format, which remains our primary format for growth. The combination of our large and small-store formats allows us to strengthen our market share position and give customers convenient access to shop for food and general merchandise, as well as access to our e-commerce offerings. We believe our multi-format portfolio will fuel the next generation of retail; enable the convergence of digital and physical store locations through e-commerce; and unlock value, giving our customers anytime, anywhere access to Wal-Mart.”