Taking Stock

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 Local Notes 

Plenty of Ahold news to report this month, including its third quarter sales performance, which was generally flat (a trend we’re seeing all too much lately in the supermarket portal). The Amsterdam-based retailer said that net sales, underlying income and operating income were marginally down, but net profit rose 17 percent. At its U.S. stores, identical sales growth was 0.1 percent (0.6 percent excluding gas). The Dutch merchant noted that “…our stores maintained stable volumes and had low levels of inflation. In a promotional market, our U.S. operations gained market share. Consumer confidence in the economy remained fragile.” During the quarter, AUSA closed six New Hampshire units. Underlying U.S. profit margin was 4.0 percent compared to 4.1 percent last year. At the end of the third quarter, AUSA operated 772 stores, three fewer than in the corresponding period in 2012. Just before presstime, we learned that AUSA’s CEO Paula Price will be leaving the company at year’s end to pursue a career in academia – she will lecture at a leading university on leadership and technical topics. An extremely nice and very talented lady, we wish Paula all the best in her new career direction. She’ll be replaced by Dan Sullivan, currently senior VP-business planning and performance for AUSA, who joined the Carlisle, PA-based retailer in 2010 after serving as the chief financial and operating officer for Heineken USA. And a tip of the hat to Ahold USA’s Giant/Landover unit, which last month opened its 8th &O Street store in Washington, DC. The new replacement supermarket is truly beautiful – coupling the original “city market” flavor with a stunning modern design. Giant/Landover has another  DC project under way (Wisconsin Avenue; it also opened 3rd & H Street earlier this year) and with the Wal-Mart openings earlier this month, the growing presence of Whole Foods (which is constructing a new unit near Nationals Park and has reportedly agreed to build another new unit on H Street NE between 6th and 7th Streets) and Harris Teeter (a new store is being built near Nationals Stadium) as well the investment that DC market leader Safeway has made in the past five years (new stores are also slated for the Petworth and Tenley Circle areas), the District has become a hotbed of new store activity. Additionally, there may or may not be a Wegmans coming to the nation’s capital. The Rochester, NY uber-retailer was very interested in the former Walter Reed Hospital site, and aligned themselves with District developer Roadside Development. However, early last month, the city selected another developer, Hines Interests, to transform the Medical Center complex into a three million square foot mixed-use project. Whether the District’s decision to eliminate Roadside from consideration would be a deal-killer for Wegmans remains to be seen…other stores to open in the past 30 days include Harris Teeter’s Clarksburg, MD unit (it will cut the ribbon at its Crown Farm store in Gaithersburg, MD next month, giving the upscale retailer six stores in Montgomery County) and the debut of The Fresh Market in Ashburn, VA (perhaps the most overstored berg in the entire Mid-Atlantic region)…Wakefern, the largest wholesale food co-op in the country (and expanding rapidly), is suing Lexington Insurance Co, a unit of AIG, for breach of contract, alleging that the big insurance firm has yet to pay out more than a small portion of losses at its members’ ShopRite stores as a result of Hurricane Sandy last year. Filed in Superior Court in Middlesex County, NJ, the Keasbey, NJ-based wholesaler is reportedly claiming that Lexington has denied coverage for more than $50 million in losses caused by the devastating storm. Wakefern is also allegedly charging that Lexington failed to respond promptly and meaningfully to its claims and then didn’t investigate them with due diligence. The complaint covers approximately 300 ShopRite and PriceRite stores…it was a challenging third quarter at Weis Markets. The Sunbury, PA-based regional chain posted a 31.9 percent dip in earnings for the period ended September 28. Profits were $11.7 million for the period and both overall sales (negative 1 percent) and comp store revenue declined (negative 2.9 percent). Weis said that “stagnant” center store sales in certain categories and significant deflation in fuel costs contributed to the volume drop. The closely-held regional chain took a $2.1 million impairment loss on four properties and also posted a $6.1 million charge related to the separation agreement with former CEO Dave Hepfinger, who resigned in September. Weis said it recently has stepped up its promotional and sales building activities and expanded its loyalty marketing efforts to ignite sales in its fourth quarter. More Weis stuff:  Mike Mignola, senior VP-store operations, who was one of Hepfinger’s first hires from Price Chopper, has left the organization and the retailer has appointed John Neuberger as VP-operational administration. He will oversee the retailer’s store support functions including budgeting, sales and labor, net income performance, best methods for operations and retail efficiencies, inventory shrink and total store customer service. Neuberger is a Price Chopper alum. Joining Weis, too, are Marie Underkoffler as director of compensation and benefits and James Murphy as director of construction. November was a very busy month for the regional chain as well with ribbon cuttings at its two State College, PA units (remodelings), a new store in Huntingdon Valley, PA (a former Pathmark) and the unveiling of major remodelings in Danville, PA; Brodheadsville, PA; Pasadena, MD; and Odenton, MD…another baffler from the so-called “Wizards of Wall Street.” After Whole Foods, the best performing supermarket chain in the country over the past two years, posted a profit gain of 7.1 percent, an overall revenue increase of 2.2 percent and a 5.9 percent jump in comp store sales in its fourth quarter ended September 29 (12 weeks vs. 13 weeks last year), its performance was heavily criticized by many financial analysts. Apparently those strong numbers weren’t good enough for the armchair money changers who downgraded the stock (creating a sizeable dip in share price) and faulted the Austin, TX natural and organics retailer’s sales and earnings performance. To be fair, WFM did lower its financial guidance for fiscal 2014, but the chain’s numbers continue to be “off the chart” especially when compared to its supermarket peers. Share price, despite the recent tumble, has increased nearly 40 percent this year and in FY 2014 the company plans to open between 32 and 38 new stores. “We reported record fourth quarter operating results which contributed to the best fiscal year performance in our company’s 35-year history. For the last four years, we have increased our new store openings while producing improvements in operating margin and higher returns on invested capital, and we expect these trends to continue in fiscal year 2014,” said John Mackey, co-founder and co-chief executive officer of Whole Foods Market. “We are dedicated to providing our communities with fresh, healthy, natural and organic food, and with 94 leases in our development pipeline, we look forward to delivering accelerating new store growth for several years to come.” That statement alone will hopefully allow the financial analysts to gain some perspective. Although I doubt it…kudos to Wawa CEO Chris Gheysens, who delivered a masterful speech to more than 200 students last month at the Pat McCarthy Lecture Series at Saint Joseph’s University in Philadelphia. Not only was Gheysens’ talk detailed and interesting, his humble, self-deprecating style was a big hit with the future food industry executives. Filling retired chief executive Howard Stoeckel’s shoes is indeed a tall order, but I think Wawa got it right when they promoted Gheysens, who I believe is a future superstar in the food industry…it’s been a difficult month with several industry deaths, which always seem heavier around the holidays. Passing away late last month was Bob Carey, former president of the Produce Marketing Association (PMA), one of the early produce pioneers, who took the helm at the Newark, DE trade association in 1958 when it was almost bankrupt. “Bob’s real genius was getting the best out of everyone around him – members and staff – and that’s become a core part of PMA’s culture,” noted current PMA CEO Silbermann. “Bob’s leadership was the linchpin for PMA’s growth and success, but it was his engaging personality, compassion, humor and empathy that endeared him to all those around him.” Carey, who retired in 1996, was 82. The industry also lost another engaging personality with the passing of Herb Schwartz, former co-owner of general merchandise firm Rainbow Distributors. Herb began his career as a rack jobber for Merchandising Sales in the late 1960s and he and his partner Nels Leavey founded Rainbow in 1976. He sold his share of the business to Leavey in 1990 and entered a new career in the mortgage business. Leavey noted: “Herb was the most likeable, honest and selfless man I ever met. He was an adoring and loving father and grandfather. He was well respected in the industry and his customers became and remained his friends. His lasting legacy is that whenever you mention his name, people would smile and remember a moment when he touched their lives. I knew Herbie for 40 years. He was not only my partner, but my best friend. He will be missed by all who had the great privilege of knowing him.” I’m sad to also report the death of Al Mindel, one of the mainstays at Giant/Landover for more than 30 years. Al began at Giant in 1956 as a cashier in the company’s Seven Corners, VA unit and in 1964 was elevated to a headquarters post where he wore many hats, including director of grocery, pharmacy and bakery merchandising. Al was a tough bird with a big heart who had a great memory and uncanny street smarts. Herb Whiteside has also passed away. The former A&P executive, who spent his entire 38 year career at the Tea Company, died last month. When I first arrived in town in 1978, Herb Whiteside was one of the first people I met. His self-deprecating humor and folksy personality belied his uncanny people skills and native intelligence about the grocery business and how life really works. Herb was a dedicated and loyal leader who had many jobs with A&P, and despite the ups and downs of the business, always retained a positive and proactive approach. He was the ultimate gentle giant and I’ll miss his warmth, humor and compassion.  Finally, I am very remorseful about the passing of my friend Wolf Mueller. Wolfgang Mueller was 94 years old when he passed and he lived virtually every day until nearly the end to the fullest. But, if you lived his life and were gifted with his DNA, you’d probably do the same. Born in Germany in 1919, Wolf was a Holocaust survivor, a U.S. Army veteran, a great family man, an entrepreneur, a raconteur, a joke teller, a tennis player, an art collector, an author – well, he truly was a Renaissance man – a person who could find common ground with his aging peers as well as his nine grandchildren and 16 very young great-grandchildren. Wolf spent more than 40 years in the meat and seafood business most recently with NAFCO Seafood (retiring only a few years ago). I am the son of two Holocaust survivors and Wolf, through his network of contacts in Germany, helped track the histories of my mother and father and their families. For that I am eternally grateful. To his wife, the lovely and vivacious Sonya, his daughter JoAnn Pearlman, son-in law Stanley Pearlman, their four children – Jonathan, Jessica, Jamie and Jeffrey – and their children, this is a tremendous loss and I offer them my deepest condolences. To his extended family and friends, there will also be something missing. Wolf Mueller was a very special person who touched many others with his charismatic personality and unique ability to make you feel better about yourself.