Taking Stock

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‘Round The Trade 

A rollicking good time was had by many at Wal-Mart’s annual meeting held earlier this month at the (where else?) Bud Walton Arena on the campus of the University of Arkansas in Fayetteville. More than 14,000 shareholders and Wal-Mart associates came to hear celebrities Harry Connick, Jr. (who also emceed), Pharrell Williams, Sarah McLachlan and Robin Thicke perform at the annual spectacle. When the show business ended and the real business began, Behemoth CEO Doug McMillon claimed that the biggest task facing the world’s largest merchant was to bring the changing world of e-commerce together with its physical stores to improve its customers’ shopping experience. “Our purpose of saving people money will always be relevant, said the 23-year Wal-Mart veteran, who was elected chief executive in February. “We’re going to invent the new and bring together the digital world of e-commerce with the physical world of our stores.” In the meantime, McMillon and his team are continuing to deal with a prolonged slump. ID sales at its U.S. stores (which account for 60 percent of the retailer’s total sales) have now declined in five consecutive quarters and customer counts have also dipped. Clearly, Wal-Mart is being hurt by the slipping buying power of its primary customer base. Competitors have had 20 years to memorize the company’s playbook and have thus developed methods to defend against the Behemoth’s go-to-market initiatives. One of Wal-Mart’s ongoing problems is the numerous lawsuits and ethical issues it continues to face. The biggest of all, its Mexican bribery scandal, is now nearly three years old. You would expect that with so much time elapsed and with Wal-Mart’s detailed, costly investigation into this “black mark,” that there would some answers to be gleaned by now. Not so, according to an excellent story in the New York Times on June 4. Although the Times piece detailed the connection of the bribery scandal with the departure of several former Wal-Mart executives and how the company has changed its compliance structure and personnel, there’s no indication that the investigation is nearing its end or that a report will soon be issued. What we do know is that Wal-Mart has reportedly spent $439 million on the investigations and restructuring of its compliance program. Geez, we put a man on the moon faster than this. And that’s really a critical problem that McMillon needs to improve. His predecessors – Lee Scott and Mike Duke (who ironically are both linked to the problems in Wal-MartMexico) – never worked hard enough to change Wal-Mart’s image as a somewhat sneaky, heavy-handed company that squeezed its associates and leveraged its huge clout to achieve its goals (Mel Brooks might have referred to them as “Engulf & Western”). McMillon has a real opportunity to change that image. More Wal-Mart news: the company is taking its online price comparison tool – “Savings Catcher” -nationally. “Savings Catcher” compares competitors’ ads for items at Wal-Mart and offers gift e-cards for the price differential when a competitor’s price for an eligible item is lower. Wal-Mart test-marketed the program in about a half a dozen markets this spring…Grocery Outlet, which is a significant factor on the West Coast and acquired New Holland, PA-based Amelia’s Grocery Outlet in 2011, is reportedly on the sales block, according to multiple sources. The small-box discounter is currently owned by PE firm Berkshire Partners LLC. The company operates approximately 180 stores and had estimated annual sales of $1.4 billion, with earnings in the $100 million range. It is reportedly seeking at least $1 billion to sell…Advantage Sales & Marketing (ASM), which along with rival broker/agencies Acosta and Crossmark led the effort to take their businesses national, has a new owner. Leonard Green & Partners and CVC Capital Partners have acquired a majority interest in the Irvine, CA-based sales and marketing firm from another PE firm, Apax Partners. The price is reportedly in the $4 billion range for a company whose annual revenue is estimated to be $1.6 billion. Leonard Green marks the fourth private investment firm to own ASM since 2006. Leonard Green also has a stake in other food companies such as BJ’s, Petco and Jetro. I wonder if the Los Angeles investment company will seek to make ASM the first food brokerage firm to launch a public offering? Both Acosta and Crossmark are also controlled by Wall Street financial investment organizations…in the biggest food industry deal of the month, it looks like Tyson’s all cash $8.55 billion bid to acquire Hillshire Brands was enough to convince Hillshire’s board to win the competition between the large protein processor and Pinnacle Foods (Aunt Jemima, Duncan Hines, Wish Bone, etc.). Tyson’s bid also trumped an $8 billion offer made by Pilgrim’s Pride. The spoils of potentially losing aren’t so bad in this case. If Pinnacle elects to offer no further challenge to Tyson’s bid, it would receive a $163 million termination fee.