Taking Stock

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Local Notes

On March 9, Weis Markets cut the ribbon on its long-awaited 65,000 square foot store in Enola, PA. This new unit offers several notable wrinkles for the Sunbury, PA-based merchant, including its first in-store pub, an ice cream shop and juice bar encompassed in a “community market” design. Weis will need to be on its “A” game considering that rival Giant/Carlisle operates one if its best stores, a 76,000 square foot replacement unit that opened in late 2014, directly across the street…it was a busy month for earnings and we’ve got some highlights (and lowlights) to report.

While we’re on the subject of Weis Markets, the regional chain’s numbers were very good for its fourth quarter and 2016 year end. Adjusting for the extra week in 2016, the company’s fourth quarter sales increased 17.6 percent while comparable store sales were up 3.4 percent. “In 2016, we acquired and converted 44 stores in 96 days and generated more than $3 billion in sales for the first time in our 10- year history,” said Jonathan Weis, Weis Markets chairman and CEO. “We continued to improve every aspect of our operations in 2016, including supply chain, merchandising and in-store experience, which resulted in a year of strong sales and earnings growth.” During the 14-week period ended December 31, 2016, the retailer’s fourth quarter overall sales increased 26.0 percent to $925.1 million compared to $734.1 million for the 13-week period ended December 26, 2015. Fourth quarter net income increased 148.2 percent to $41.1 million. During that period, Weis Markets realized a one-time gain of $23.9 million on the purchase of the 38 Food Lion stores. Fourth quarter operating income increased 4.9 percent to $27.0 million compared to the same period in 2015. For all of fiscal 2016 and also adjusting for the extra week, the company’s 2016 sales increased 6.9 percent while comparable store sales increased 2.9 percent. With the extra week added, its 53-week period revenue increased 9.0 percent to $3.1 billion compared to $2.9 billion for the 52-week period in 2015. Year-to-date net income increased 46.9 percent to $87.2 million, while earnings per share increased 46.6 percent to $3.24 compared to $2.21 in 2015. Year-to-date operating income increased 8.3 percent to $98.3 million. Weis attributed its comparable sales and net income increases in 2016 to continuing price investments, disciplined sales promotions, an enhanced customer experience and improved supply chain efficiencies. It also benefited from strong increases in its pharmacy and fresh department sales, the company noted. Also reporting solid fourth quarter earnings in the U.S. was Ahold Delhaize. At its Ahold USA unit, operating margin was 4 percent, but as previously reported comp store sales declined 0.2 percent at its nearly 800 stores. The star of the show was Delhaize America’s contribution (Food Lion, Hannaford) where comps increased 2.2 percent and underlying operating margin was 3.6 percent. There’s no question that the newly formed Ahold Delhaize machine knows how to make money. As for AUSA, its ongoing reorg should lead to improved sales, too (if you believe their rhetoric). But as I’ve said many times, efficiencies and backroom enhancements will mean little if more attention isn’t paid to the stores – particularly staffing and training. At Food Lion, which just began its “easy, fresh and affordable” remodeling program at its160 store Greensboro, NC division, the upcoming onslaught of Lidl openings will be the biggest challenge that Le Lion has faced in years. Also reporting fourth quarter earnings recently was Publix. The employee-owned juggernaut, which will enter the Richmond market later this year, posted a solid 2.2 percent comp store increase (about the peer group average) while growing earnings by 4.5 percent to $544.5 million. “I’m proud of our Publix associates – the owners of Publix – for continuing to make us a leader in our industry and providing a great shopping experience,” said Todd Jones, CEO of the Lakeland, FL-based chain which operates 1,143 units in the Southeast. On the negative earnings track were Target and Sears Holdings. Target posted its third consecutive comp store decline (negative 1.5 percent in the quarter, 4.3 percent for the full year) in its recently completed fourth quarter ended January 28. With profits also decreasing 13.5 percent, CEO Brian Cornell went on the offensive, noting that the Minneapolis-based mass merchant would “accelerate investments in a smart network of physical and digital assets as well as our exclusive and differentiated assortment, including the launch of more than 12 new brands, representing more than $10 billion of our sales, over the next two years.” According to the former Pepsi, Safeway and Wal-Mart executive, Target’s ramp-up pf a focus on small-format stores will yield more than 100 such locations expected to open within three years. Another 600 stores are set for overhauls over the same timeframe, to better reflect the brand. “We have some old, tired stores that haven’t been updated in years,” Cornell told financial analysts in the post-earnings conference call, adding that “it’s unrealistic to ask people to shop the way their parents did.” And at Sears Holdings, fourth quarter numbers continued to resemble a train wreck. The Hoffman Estates, IL-based firm posted a $607 million loss in the period; same store sales fell an incredible 10.3 percent, all leading to a 58 percent share decline over the past 12 months. However, CEO (Slow) Eddie Lampert apparently has a new idea that he believes will provide some relief. Last month, the bedraggled operator unveiled its first DieHard Auto Center (Driven by Sears) in San Antonio, TX. I’m not certain if the new concept and brand were derived from the car battery of the same name or whether the company was describing its ongoing descent into the inevitable…often one of the byproducts of disappointing earnings is an ensuing reduction of staff, and such is the case at Kroger, which has offered buyouts to approximately 2,000 associates. The company said about 1,300 employees are expected to accept the voluntary separation package and the Cincinnati-based supermarket chain said it will announce the amount of saving generated by the buyouts in its Q1 earnings report in June. While the big K may be currently undergoing some in-flight turbulence, I for one have not lost any confidence in the ability of the industry’s biggest pure-play supermarket operator to do what’s needed to get back on course. And that’s primarily because, in my book, fundamental soundness almost always overrides shorter term issues like deflation and price wars…Acme Markets, which has struggled with assimilating the approximately 75 stores it acquired from A&P 18 months ago (particularly in Northern New Jersey, New York and Connecticut) recently held a vendor meeting at its store in Pennsville, NJ. Primary speakers were president Dan Croce and Albertsons EVP Jim Perkins (who preceded Croce as Acme president). As usual, both men gave candid, honest views of the company’s current status, acknowledging that every day retails were too high and that continuing attention has to be paid to upgrade the store base. These dudes don’t waste time. In the two weeks since the meeting was held, Acme has lowered hundreds of prices while also accelerating their store remodeling agenda and reset program. Twenty-five grand re-openings are slated for 2017 (some have already been completed) in addition to 23 remodels and two new stores. And before the year has ended, Acme will have completed about 100 center store resets, a company record. In fact, Croce stated that Acme will receive more cap-ex dollars than any other Albertsons division in 2017…Wegmans and other retailers (and some trade journalists) have long understood that when it comes to politics, we all should emulate Switzerland. After the Prince William (county), VA chapter of the National Organization for Women pressured the Rochester, NY-based uber-retailer to stop selling five varieties of Trump Winery products (formerly Kluge Estate winery based in Charlottesville), Wegmans stuck to its age-old policy of letting its customers decide. “Our role as a retailer is to offer choice to our customers,” said Jo Natale, VP-media relations (and one of the best in business).” Individual shoppers who feel strongly about an issue can demonstrate their convictions by refusing to buy a product. When enough people do the same and sales of a product drop precipitously, we stop selling that product in favor of one that’s in greater demand.” Apparently that boycott effort has backfired. According to the Richmond Times-Dispatch, all varieties of Trump brand wines at nine of Wegmans’ 10 Virginia units are out-of-stock and the remaining inventory at its newest Old Dominion unit in Charlottesville is very depleted. As noted, politics and sales are usually not good bedfellows…FreshDirect, the online grocery delivery service, that owns the Manhattan market, will be expanding its service the Washington, DC market in Q2. Fueled by a $189 million cash infusion from J.P. Morgan, the Long Island City, NY company expanded to Philadelphia several years ago and has launched FoodKick, an on-demand mobile delivery app and service…brave dude award of the month goes to Robert Beck III of Conewago Township, PA, who after seeing a deer crash through the window at a Giant/Carlisle store in Manchester Township, PA, wrestled the ruminant doe to the ground and prevented it from barreling into the supermarket’s glass-enclosed bakery case. “When I seen it, it was game on,” said Beck (apparently in his best Pennsyl-tucky English). Beck grabbed the deer by the neck, and with the help of two other patrons, was able to lead it outside the store…very sad to report the death of Robert Osborne, the primary host of Turner Classic Movies, who passed away earlier this month at the age of 84. If you are a life-long movie aficionado, as I am, you couldn’t help but appreciate Osborne’s encyclopedic knowledge and passion for film. Despite some health issues over the past several years, the former failed actor never lost his dedication and enthusiasm for all things cinematic…also leaving us were two unsung musical prodigies. Jazz singer Al Jarreau passed away last month at the age of 76. Blessed with a tremendous vocal range, the Milwaukee native didn’t release his first album until he was 35. Over the next 40 years he would release 19 more albums and was rewarded with seven Grammys in the jazz, pop and R&B categories – the only vocalist to be honored in all three genres. Entering guitar heaven is Larry Coryell, whose fusion style made him a pioneer of jazz-rock. Coryell’s career took many twists (by his own design). On the jazz side he collaborated with such greats as Miles Davis, Ron Carter and Chet Baker. And in the late sixties, he delved into psychedelic rock with his band The Free Spirits, in which he composed, sang and played the guitar and sitar. A great technician who also possessed creative jamming skills, Coryell, 73, released more than 60 solo albums in a career that spanned more than 50 years. He died in his sleep after performing the last of two shows on February 18 at the Iridium Jazz Club in New York City…passing away too early was actor Bill Paxton, who among his 93 movie and TV roles included such blockbusters as “Apollo 13” (1995); “Twister” (1996); and “Titanic” (1997). We all have those “never forget” moments and Paxton’s came as an eight year old when the Fort Worth, TX native was taken to Dallas by his father to see President John F. Kennedy on the fateful morning of November 22, 1963. Paxton was only 61 when he died…the progenitor of all reality courtroom TV shows has now received his final verdict. Yes, sadly, Judge Wapner is dead. Former Los Angeles Superior Court Judge Joseph Wapner died in his sleep late last month at age of 97. From 1981 to 1993, “The People’s Court” was where you could find the good judge on hundreds of local TV stations where he would adjudicate small claims cases, sometimes involving ridiculous confrontations such as when a women bought a birthday cake for her daughter for $9.00. She said the cake was moldy and the baker offered her a refund of $4.50. She then picketed the bakery for six hours and then filed her claim. “I told her that persistence pays off and awarded her $9.00.” Actually, as a real jurist, Wapner was considered an innovator. He was credited with developing a system aimed at saving time for trial participants and his courtroom (which was part of the largest court in the U.S.) was among the first venues to test videotaping of trials in 1971.