Taking Stock

Print Friendly

‘Round The Trade 

I can attest that Tom Lenkevich, the man who is replacing Rick Herring as president of Ahold USA’s Giant/Carlisle unit, will have big shoes to fill. Taking over from one of the nicest and most respected executives at AUSA will be a challenge, but Lenkevich has been challenged before and has always been up to the task. I think his cohorts will find him very intelligent, genial and a very hard worker who has been around the grocery business since the late 1970s. It will be interesting to watch his progress, because he’s joining AUSA not only at a time of  extreme sales pressure (as witnessed by fourth quarter earnings and sales results), but at a time when the company is also in the midst of a significant culture change.… a tip of the hat to Kurt Schertle who was recently elevated to the post of chief operating officer at Weis Markets. In his five years at the Sunbury, PA retailer, Kurt has demonstrated leadership, creativity, a tireless work ethic and the ability to wear many hats, especially in the last six months following the departure of former CEO Dave Hepfinger. Certainly a priority for Kurt and his boss, CEO and vice-chairman Jonathan Weis, will be to improve the balance sheet. In its recently ended (December 28) fourth quarter, Weis’ earnings, overall sales and comp-store revenue all declined in what all retailers are finding to be a more challenging market than even 12 months earlier. Now, along with a still “not right” economy and outrageous overstoring, comes a reduction in SNAP benefits and virtually no inflation (in fact, deflation in certain categories). However, I believe that the new leadership team of Weis and Schertle is focusing on driving sales and is less interested in short-term profits. That’s sometimes a painful message for publicly-traded companies to deliver, but it’s the only way to get the ship back on course…staying local, Village Super Markets, ShopRite’s second largest member and only publicly-traded operator, posted a 69.1 percent drop in net income in its second quarter ended January 25. The Springfield, NJ-based regional chain said that profit decline was caused due in part to a $2-million charge for future lease obligations due to the closure of a store in MorrisPlains, NJ, and an $840,000 boost in the prior year’s second quarter following a partnership distribution. Excluding the two items, the 29 store retailer said net income would have declined 42 percent. Overall sales for the quarter rose 2.6 percent to $392.2 million, reflecting the opening of a replacement store in Hanover Township, NJ in November. Same-store sales were flat…and speaking of disappointing earnings, it was a very tough fourth quarter for Wal-Mart as the Bentonville behemoth’s U.S. numbers took their biggest dive in several years. Comp store revenues for the period ended January 31 fell 0.4 percent, marking the fourth consecutive quarter that same store sales have declined, and earnings dipped 21 percent during Wal-Mart’s critical holiday period. Traffic counts also decreased by 1.7 percent. Bill Simon, CEO of Wal-Mart’s U.S. stores, said cuts to SNAP adversely impacted the big retailer’s results. An exceptionally ferocious winter with multiple storms also cut into earnings, Simon noted, and detracted from a positive performance during the six-week holiday shopping period. He added that the storms weren’t an excuse, but merely an explanation. Simon also affirmed that Wal-Mart’s plan to aggressively open new smaller format units (Neighborhood Market, Express) is on track and in 2014 about 270-300 units will open. “Customers’ needs and expectations are changing,” Simon asserted, “and they want to shop when they want and how they want, and we are transforming our business to meet their expectations.” However, at the end of the day, the behemoth’s SuperCenters remain the stalwart engine for the company and 115 new combo units are slated to open this year. And while the boys from Bentonville may be going through a rough patch, let me remind you that Wal-Mart finished the past 52 weeks with a staggering $473.1 billion in annual sales, earned $16.1 billion and plans to spend $12.4-$13.4 billion this fiscal year (2015) in cap-ex…even Costco, the perennial poster child for strong earnings and consistently stellar identical store sales, hit a rough patch (for them) during their second quarter ended February 16. The Issaquah, WA-based club store merchant experienced a 15.4 percent earnings dip and, while comp store revenue gained three percent, that number represented about half of what Costco typically posts for same store sales gains. CFO Richard Galanti noted that Costco was hit hardest during the four weeks leading up to Christmas, adding that weaker sales in several non-food categories impacted the nation’s largest club store operator, as did Costco’s own decision to hold margins in place, particularly in fresh foods. Costco will open its first store in Spain (Seville) on May 11 and is looking to expand to France, perhaps as early as 2015…some recent changes at Cerberus’ Supervalu unit related to the pending Safeway acquisition. Mark Neporent and Lenard Tessler have resigned from Supervalu’s board because of their connection to Cerberus. Neporent is COO and general counsel for Cerberus Capital Management and Tessler is the co-head of global private equity and senior managing director of the New York private equity firm. Both men joined the board following the Cerberus-led acquisition of Supervalu’s assets and its investment in Supervalu. Another Cerberus affiliate, Symphony Investors, owns 21 percent of Supervalu’s stock. Also at Supervalu, Shane Sampson, the veteran Albertson’s executive (part of “Miller’s posse”) who rejoined the company as president of its struggling Shaw’s/Star Market unit in New England (he was most recently with AUSA’s Giant/Landover division) after the Cerberus gained control of Supervalu last March, is moving to Chicagoland to oversee SVU’s large Jewel-Osco unit. Shane, a very strong operator, did a really good job in helping stabilize, then improving Shaw’s. Now he faces another huge challenge in enhancing Jewel, which has been trending downhill for a decade. But Chicago is a changing marketplace, with the closing of Dominick’s stores and the expanded presence of Wal-Mart, Meier, Whole Foods and Mariano’s. However, Shane is entering an arena where Jewel is also expanding by adding nine former Dominick’s stores and pledging to spend $100 million on capital improvements. Moving to New England to become president of Shaw’s is Jim Rice (no, not the former Red Sox player). Another veteran Albertsons exec, Rice was most recently running Jewel-Osco on an interim basis (replacing another “Miller posse” member, William Emmons, who retired in January)…the first fallout news from Target’s security breach late last year: Beth Jacob, the mass merchant’s chief information officer (CIO) has “resigned.” And while I’m pretty certain Jacob had no direct involvement in Target’s security and IT problems, the bad stuff happened on her watch and “a company’s got to do what a company’s got to do.” CEO Gregg Steinhafel said a search for an external candidate is under way…former Acme Markets president Dan Sanders has a new job. The bright and outgoing grocery industry executive has reportedly been named to oversee operations at Cardenas Northgate Group Ranch, the newly formed joint venture that was created last month by two large Hispanic retailers (Cardenas Markets and Northgate Gonzalez Markets) after acquiring the assets of Pro Market’s 11 stores which were in bankruptcy. All told, the new organization will operate more than 60 stores in Southern California, Arizona, New Mexico and Texas (Sanders’ native state)…very interesting piece in the February 25 edition of The Wall Street Journal noting that Target is “punishing” Procter & Gamble for the role the large CPG packer has played in assisting Amazon’s exponential growth in recent years. The story states that P&G has literally set up shop inside Amazon’s many distribution centers (with many more to come) to help create greater efficiencies for the online merchant and Procter. The story adds, “P&G loads products onto pallets and passes them over to Amazon inside a small, fenced-off area. Amazon employees then package, label and ship the items directly to the people who ordered them. The under-the-tent arrangement is one Amazon’s competitors don’t currently enjoy, and it offers a rare glimpse at how the company is trying to stay ahead of rivals, including discount chains, club stores and grocers.” Target, which isn’t having a particularly enjoyable last few months, has allegedly reduced the number of end-caps, moved P&G products to less optimal shelf positions and taken away the “category captain” designation in several key categories. Whether it’s a fair retaliatory practice or not, the age old adage of never pissing off a customer applies here…baseball trivia question: who has almost as many saves as Mariano Rivera? Hint: he never played professionally. The answer: Dr. Frank Jobe, the orthopedist who pioneered elbow ligament transplant surgery (“Tommy John” surgery, which Dr. Jobe termed ulnar collateral ligament reconstruction while using the Palmaris longus tendon). Dr. Jobe passed away earlier this month at the age of 88. After Dr. Jobe put his medical theory to use with Tommy John in 1974, the crafty left-hander went on to play 14 more years and win another 164 games. Dr. Jobe, who was also the Dodgers’ orthopedic doctor for many years, personally performed several hundred “Tommy John” operations (a procedure that’s since been done by other orthopods thousands of times) and also developed a groundbreaking shoulder surgery procedure that’s still deployed today, and according to former Dodgers pitcher Orel Hershiser, “gave me back my career.” The crop of current pitchers whose careers have been extended by “Tommy John” surgery includes: Matt Harvey, Joe Nathan, A.J. Burnett, Tim Hudson and Stephen Strasburg. Also passing on was comedy legend Harold Ramis, 69, who produced, directed and wrote some of the greatest comedies of my generation – “Animal House” (1978), “Caddyshack” (1980), “Stripes” (1981), “National Lampoon’s Vacation” (1983), “Ghostbusters” (1984), “Back To School” (1986), and “Groundhog Day” (1993). Ramis, a Chicago native, began his career with the legendary SecondCity comedy troupe in 1969. For the Ramis movies listed above, here’s a famous line from each of those films. Can you match the line with the movie and the character or actor who delivered it? (send me an email at jmetzger@best-met.com). 1) “Oh, this is your wife, huh? A lovely lady. Hey baby, you must’ve been something before electricity.” 2) “I got laid off when they closed that asbestos factory, and wouldn’t you know it, the Army cuts my disability pension because they said that the plate in my head wasn’t big enough.” 3) “Fat, drunk and stupid is no way to go through life, son.” 4) “C’mon, it’s Czechoslovakia. We zip in, we pick ‘em up, we zip right out again. We’re not going to Moscow. It’s Czechoslovakia. It’s like going into Wisconsin.” 5) “I liked the university. They gave us money and facilities and we didn’t have to produce anything! You’ve never been out of college! You don’t know what it’s like out there! I’ve worked in the private sector. They expect results.” 6) “The football team at my high school, they were tough. After they sacked the quarterback, they went after his family.” 7) “This is pitiful – 1,000 people freezing their butts off to worship a rat.”