Wal-Mart Ready To Explode Into Washington, DC Market

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The speculation has been rampant for about six months, and Wal-Mart made it official last month by acknowledging that it will enter Washington, DC. And the ramifications could be huge, because in the next 18 months, there will be four new Wal-Mart units open for business in the District.

Wal-Mart has been outspoken in its belief that it lacks a significant presence in many urban markets. First came the announcement that it would open as many as two dozen stores in previously “protected” Chicago. Then the company said it would prioritize other key underserved urban markets such as New York, Philadelphia, Boston, Baltimore, Detroit and Washington, DC.

The four stores will all be built in areas that are generally underserved: 5929 Georgia Ave NW; New York Ave. and Bladensburg, Rd NE; 200 New Jersey Ave. at H St. NW; and at East Capitol and 58th Streets NW). Store sizes will range from 80,000-120,000 square feet and while they set up best as conventional discount Wal-Mart’s (“Division One” units), all will feature a significant number of grocery items.

Wal-Mart said it expects to created about 400 construction jobs and generate more than $10 million in tax revenue for the District.

This announcement does not include any potential other “small format” Wal-Mart units that will be tested nationally next year. It is expected that the Bentonville, AR retailer will focus on those same underserved urban markets with its 20,000-60,000 square foot smaller footprint when it expands that rollout, most likely in 2012.

Likely to feel the Wal-Mart blast the most is Safeway which dominates food sales in the District with 17 stores and an ACV share of 35.33 percent.

And in Baltimore, after months of contentiousness, the City Council last month approved a plan to develop a 330,000 square foot shopping center (on 25th St., on the site of the old Anderson Chevrolet dealership). That parcel will include a 93,000 square foot Wal-Mart.

In other Wal-Mart news, the company continued to struggle with comp store sales at its U.S units, posting a 1.3 percent decline it its third quarter which ended October 29. However, in an analysts’ conference call, Bill Simon, the company’s U.S. president and chief executive, noted that food comps were “a solid positive.” Simon said that part of that improvement came from restoring products that were cut last year during Wal-Mart’s disastrous “Project Impact” program (are you listening Craig Herkert?). Part of Wal-Mart’s new “go-to-market” strategy as it pertains to groceries is the restoration of its pallet-driven “Action Alleys” in the stores.

Regionally, more than a few of us were surprised that Northeast Region (covering more than 1,300 stores) president Hank Mullany has left the organization. Mike Moore, a 28 year Wal-Mart veteran, will relocate from Bentonville AR to the chain’s regional headquarters in Horsham, PA. But now, the cat’s out of the bag: Mullany left to join CVS as president of its pharmacy unit.

And on the new store front, Wal-Mart has been very busy. In the past few months, the Behemoth has converted its Northeast, MD “Division One” store to a full-fledged SuperCenter (198,000 square feet) and has also expanded its Dumfries, VA unit to a SuperCenter (151,000 square feet). The planet’s largest merchant also converted its Charlottesville, VA unit to a combo store (also 151,000 square feet). In Pennsylvania, Wal-Mart opened new 155,000 sq. ft. SuperCenters in Taylor Borough, PA (Lackawanna County); and Pittston, PA (Luzerne County) and a 204,000 sq. ft. expansion in Lehighton, PA. Moreover, the mega-retailer has remodeled and expanded its food sections at its Sam’s Club units in Timonium, MD and Hagerstown, MD.

Robin Michel: A Job Well Done At Giant/Landover

Maybe one shouldn’t be surprised about the seemingly sudden departure of Robin Michel as president of Giant/Landover. Her career path has had many stops and clearly she’s a strong personality to deal with. As an Ahold observer, it also seemed that she never quite fit into the new company culture. And that’s not a bad thing considering all the hurdles she was facing when she was hired in March 2008 coupled with all the Ahold USA organizational changes that have transpired since then.

At the end of the day, Robin Michel did what all the poseurs who preceded her couldn’t – she turned Giant/Landover around on several levels. She clearly was the driver that has yielded significantly improved sales and earnings, but she was also the linchpin in restoring pride and a sense of urgency to what once was among the best retail organizations in the industry.

Robin was mercurial and peripatetic; she wanted the ball on every play. She was passionate and had a tireless work ethic. Those traits alone represented a major change from Dick Baird, Marc Smith or Bill Holmes, the leaders whom she followed at Giant, and who, for a nine-year period, appeared to treat the $5 billion organization as if it was Stop & Shop’s red-headed stepchild. Yes, Robin was very demanding and often tough on her associates, but she was also tough on herself. Her standards were very high and she was driven to impart those standards to her team.

And let’s not forget that her background wasn’t in store operations or finance, but in merchandising. Learning the blocking and tackling of operating stores from a different vantage point, grasping the nuances of a new market and helping revitalize what was once a rich culture were high hurdles to clear when she arrived in Landover 33 months ago.

Clearly, there will be at least one more major move in Robin Michel’s career. That one will most likely put her in a CEO post, with the freedom and flexibility to run her own show. She deserves it.

And as she leaves later this month, the Baltimore native can look back and take satisfaction in a job well done. She clearly leaves Giant in a much better place than when she arrived.

 Wakefern Still Zooming On All Cylinders; Retail Sales Reach $11.8 Billion

Over the past five years, no retailer or wholesaler has been able to navigate the overcrowded recessionary waters better than Wakefern. The Keasbey, NJ wholesale co-op which owns 47 PriceRite Stores in five Northeastern states and whose 47 ShopRite members operate 235 stores in six states, posted record retail sales of $11.8 billion for its fiscal year ended October 2, a solid 2.8 percent gain over 2009 revenues. Additionally, wholesale volume was $9.6 billion.

“In spite of the economy, we were able to grow,” said Joe Colalillo president and COO of the co-op at Wakefern’s annual meeting, held in East Brunswick, NJ. “We’ve entered new markets while our competitors are exiting them. We’ve opened new stores while many of our competitors are closing them. And our customers are rewarding us with their loyalty I the midst of some of the stiffest competition we’ve seen in decades.”

Indeed, over the past year, Wakefern has made great strides in expanding its presence in Connecticut and Maryland with its ShopRite banner. During the past year, Wakefern members opened 14 new ShopRite stores and the company added an additional four new PriceRite units to its roster. “To support the new growth and to ensure we have the capacity to respond to all our members and the increase in volume, we have expanded our Keasbey, NJ perishables warehouse by 90,000 square feet and are acquiring an additional 140,000 square feet of produce space, said Dean Janeway, veteran chief executive of Wakefern. Also addressing the members at the East Brunswick meeting on October 28 was Joe Sheridan, executive VP of the organization. He spoke of the importance of engaging customers through the use of digital technologies, social networking tools (which is also a separate and funny Sheridan speech) and health and wellness initiatives that provide a more personal and interactive shopping experience. The days when Wakefern could only dominate the state of New Jersey, when it operated too many corporate (SRS) stores or when it had trouble attracting viable independent operators to join the co-op as well as perpetuate its current stores seem like ancient history. In the entire supermarket industry, there is nobody doing better than the company that started with eight members in 1946. Passionate retailers, enlightened management and a gritty, tenacious operating style have put Wakefern at the top of its game. And the numbers prove it.

 Local Notes

 Struggles at its recently acquired Ukrop’s operation and costs related to its restructuring held down Ahold’s earnings in the U.S. in its third quarter ended October 10. The $11 million loss relating to Ukrop’s as well as $10 million in restructuring and related charges and another $9 million in reorganization and IT integration costs, dropped U.S earnings from $234 million to $196 million in the period. However, sales remained solid, up 4.8 percent with ID revenues (excluding gas) increasing 0.6 percent, at the upper end of its peer group…Winstanley Enterprises LLC, a Concord, MA based developer and property investor has agreed to purchase six Pathmark units from A&P for $89.8 million in an arrangement in which Winstanley will lease the stores back to the Tea Company. The units encompass about 329,000 sq. ft. of space are located in Upper Darby, PA; Lawnside,, NJ; Wilmington, DE; Seaford, NY, Ozone Park, NY: and Baldwin, NY. We might see more of these types of deals in the next few months as real estate and private equity firms position themselves to gain valuable properties prior to what may in the industry view as a future auction process. And George Murphy, president of UFCW Local 27 (Baltimore area, Wilmington, DE and Delmarva), has sent a letter to his membership about the widespread speculation concerning A&P/Super Fresh. In his November 16 missive, Murphy states: “It is no secret that A&P is in a challenging economic situation. In a number of areas, the company is confronted with non-union competition that is eating into its market share and that is contributing to its financial distress. All UFCW local unions representing members who work at A&P or a supermarket owned by A&P are meeting with company officials to ascertain the future direction of the company. A&P is also in discussions with other stakeholders, including suppliers and financial institutions. To date, the only certain information anyone has on A&P is that the company has sold a handful of stores and closed others. You can also be certain that Local 27 will continue to engage in discussions with the company, and when actual developments occur you will be notified immediately. I ask you to continue to stand together as this issue is resolved. Our unity provides the strength for weathering this challenge.” Certainly, there is need for concern, given A&P’s horrendous sales and earnings, its $1.4 billion debt load and the recent reported release of a “store fact book” for the Tea Company’s Maryland units… The Fresh Market, Greensboro, NC, which operates 10 Mid-Atlantic locations among its 100 stores, officially completed its $290 million IPO last month. At the ringing of the opening bell on NASDAQ on November 9, CEO Craig Carlock said, “The Berry family, The Fresh Market’s founders, had the vision to see that people desired and deserved better quality, fresher food, paired with excellent service and an atmosphere that makes shopping for that food a pleasurable and satisfying experience. Our more than 7,500 employees — at each of our 100 stores and in our offices — work hard every day to provide our customers with amazing products and exceptional customer service. The success of our company is a result of our founders’ dream and our employees’ dedication to turning that dream into reality everyday.”…one retailer who may be going another route – from public to private – is BJ’s Wholesale Club. The Natick, MA based firm has reportedly hired Morgan Stanley to review options. This is not a new story, but one that seems to be gaining more traction, especially since private equity firm Leonard Green & Partners now controls about 10 percent of BJ’s and reportedly would like to acquire the whole enchilada. Given the uber-competitive conditions in all retail segments today and the pressure to “make the number” every quarter, a mid-sized, quietly successful company like BJ’s would be better served if it had a strong equity partner to help it develop and grow at a more comfortable pace…as you know by now, I believe that there are too many trade shows, most of which offer the vendors/exhibitors very little return on their investment. One exception was the inaugural New York Produce Show, held earlier this month at the Hilton in Manhattan. Great retailer turnout, many interesting new products and a lot of energy…Charles Conaway, former CEO at Kmart, and another in a disturbing line of white collar cheaters that dotted the landscape about a decade ago, has agreed to pay $5.5 million to settle as SEC lawsuit accusing him of misleading shareholders prior to Kmart’s 2002 bankruptcy. Oh, Mark Hansen, where are you?…Grupo Bimbo, has agreed to acquire Sara Lee’s fresh baking unit for $959 million in a deal that includes 41 U.S. baking plants…my first reaction was to laugh, but it’s no joke that Walgreens is suing Wegmans for logo infringement. Walgreens claims that it has been using the scripted “W” in its logo since 1951. However, Wegmans, which redesigned its current logo a couple of years ago, counterclaims that its current logo is a replica of the one the Rochester, NY retailer first used in the 1930s. Hey Walgreens, while you’re at it, why not sue the Washington Nationals baseball team, too…. Ajay Kanwar, has assumed the duties of senior VP- merchandising for Acme Markets. He replaces Bob Gleeson, senior VP, whose tenure in Malvern, PA was brief when he returned to Maryland to work with new Shoppers president Tim Lowe. Kanwar comes to Acme from a corporate Supervalu post in (Little House on the) Eden Prairie…early results from the Thanksgiving period from a cross-section of Mid-Atlantic retailers indicates that sales were solid-to-good, with slightly heavier traffic and a slight jump in transaction size…premium priced Fiji Water has got a real dilemma on its hands. It seems that political instability and rising taxes on the Polynesian island nation has caused the company (owned by entrepreneurs Lynda and Stewart Resnick of Pom Wonderful and Paramount Farms fame) to shut down its bottling operations. If they relocate the water source and bottling from Fiji, can they still use the country’s name on its products? Why not make it simple and transfer operations to a town in northern New Jersey – like Piscataway. Piscataway Water.  Kinda catchy, don’t you think?…in the brokerage biz, Johnson O’Hare and Sell Ethics, which were already aligned in an affiliated venture, have announced they have formed JOH Sell Ethics, which the new partnership will  provide an “East Coast Solution” from Florida to Maine. The two companies, which have worked together since 2002, noted “As the industry continues to consolidate, it becomes critical that we delivery high quality and local expertise with local owners over a broad geography.” According to Chip O’Hare, CEO of Johnson O’Hare, “…we believe that a partnership between our companies is the logical next step. The market demands it, and we are delighted to have such a talented partner in SellEthics.” Joel Barham, CEO of SellEthics, added, “SellEthics is pleased to join forces with JOH, one of the most respected sales agencies in the nation. We believe local ownership, coupled with all the necessary tools and quality personnel, provides our clients and customers with the service they deserve. Our East Coast Solution will meet the needs of the marketplace.”…a couple of high-profile deaths to report this month. If you’re a baseball fan, you, too, are to have heard of the passing of Hall of Fame Manager George “Sparky Anderson, who died last month from complications of dementia at only 76. Anderson piloted three World Series teams (the Big Red Machines of 1975 and 1976 and the Detroit Tigers in 1984.) And here’s a little Phillies trivia for you. Although Anderson made his mark as a major league manager with a career mark of, he had a very brief stint as a player, too. In 1959, he spent his only full season in the majors as a second baseman with the Phillies (he batted .218 in 152 games on an awful Phillies team that went 64-90 and finished last) before beginning a managerial career that produced 2,194 wins over a 26 year period. It’s with a heavy heart that I report the death of Leslie “Don’t Call Me Shirley” Nielsen, who passed away late last month at the age of 84. Although he began his career as a dramatic actor in the 1950s, Nielsen really made his mark later in his career as one of the great comic actors of the last 25 years. His role in the classic comedy “Airplane” (1980) as the doctor on an ill-fated flight on which many of the passengers become violently ill was unforgettable. In one hilarious scene, Nielsen instructs the flight attendant that the sick patients must get to a hospital right away. “A hospital? What is it?” the flight attendant asks, inquiring about the illness. “It’s a big building with patients, but that’s not important now,” Nielsen deadpanned.  The Canadian born actor also excelled in the three “Naked Gun” movies in which he played the bumbling but serious-minded Lt. Frank Drebin. Leslie Nielsen, a man who could make me laugh out loud, will be missed.