Like many other food retailers, Ahold Delhaize is using a two-year comparable sales “stack” review of its recent achievements as it tries to objectively measure its U.S. comp sales growth rate in Q1 2021 added to the comp sales growth rate in the prior year.
After releasing its Q1 financials, the Zaandam, Netherlands-based retailer should feel good about itself. The numbers themselves were good, but nothing like the previous four quarters when the effects of the coronavirus provided many grocery retailers with once-in-a-lifetime sales and profit rewards.
Using its “stacked” formula, the Dutch retailer said its Q1 comp sales in the U.S. actually increased by 15.5 percent.
“Overall we are very pleased with the underlying Q1 performance in both the U.S. and Europe. Our two-year comparable sales stack sequentially accelerated in Q1 2021 versus Q4 2020 in both the U.S. and Europe, as we’ve been able to retain a strong level of underlying consumer demand by continuing to adapt to the enduring consumer behavior changes. These behaviors include increased working from home, preference for healthy and fresh products, of course, and higher online demand,” said CEO Frans Muller during the retail analysts’ conference call following the financial release.
On the earnings side of the ledger, there was a slight dip as to be expected when measuring results against 2020, but the 4.8 percent operating margin (down 1.8 percent) was still healthy.
On the analysts call, Muller also addressed the subject of inflation, which will almost certainly have a major impact on food prices particularly in the second half of 2021.
“When we talk with vendors about price increases, we have a should-cost model very firmly in place. We have a whole team of economists looking at the prices for raw materials, for packaging, for energy, for labor, for transportation and so on. And that should-cost model should protect us from not accepting illegitimate pricing. So we protect it very well,” the 60-year-old chief executive noted, “We have to see how (things) develop in the coming quarters. If it’s legitimate price increases, then, of course, we have the intention to pass that on to consumers, but I think retailers are a good protection for consumers to avoid price inflation as much as possible.”
Muller also addressed Ahold Delhaize’s acquisition of FreshDirect, noting that he was in New York in late April to visit the company (a week later, CEO and co-founder David McInerney departed). He told analysts that Q1 sales were strong, adding, “They have very high fulfillment performance levels on on-time complete orders and super-high level of freshness in the proposition—60 percent of the total sales is fresh. I think it’s a great addition to us where we can learn from. And on the other hand, of course, we would like to make sure that we also share group-wide learnings with them as well, when we talk about things like marketing, digital, e-commerce and these types of areas.”
Looking more closely at the FreshDirect situation, McInerney, who became the chief executive of the Manhattan-based online perishables-drive grocer in 2018, is being replaced on an interim basis by Farhan Siddiqi, Ahold Delhaize’s chief digital officer. McInerney will continue to serve as an advisor until the end of October. The big international retailer said it will initiate a search to find a permanent CEO.
FreshDirect was founded in 1999 by Joe Fedele, Jason Ackerman and McInerney. Fedele served as CEO from 2002 until 2004 and was succeeded by Jason Ackerman, who resigned from the merchant in 2018 when McInerney, a former chef, took the helm.
“FreshDirect has been an amazing, life-changing, 20-year adventure for me,” said McInerney. “I have been so fortunate to have worked alongside an incredible team of talented, dedicated people who all share the same passion for our mission – to make great fresh food easy to get. Our amazing farmers, ranchers and fishermen have inspired me every day as partners, teachers, and true friends. With the commitment and support of Frans (Muller, Ahold Delhaize CEO), Farhan, and the entire Ahold Delhaize team, FreshDirect is in excellent hands and well positioned for continued success.”
Siddiqi, who joined Ahold Delhaize from McDonald’s Corp. in 2019, noted, “On behalf of Ahold Delhaize, I want to thank David for his dedication and leadership over the past two decades. As co-founder, David has been instrumental in establishing FreshDirect’s philosophy in bringing the best fresh and high-quality products to people’s doorsteps in the Tri-state area. We will ensure a smooth transition and honor FreshDirect’s unique customer-focused and food-centric culture and deep connection with its suppliers. FreshDirect’s customers will continue to enjoy the high-quality fresh food, great tasting products and stellar service for which FreshDirect is known.”
Ahold Delhaize (80 percent ownership) and private equity firm Centerbridge Partners (20 percent) announced last November that they had agreed to acquire FreshDirect for what was later revealed to be $408 million. Annual estimated sales for FreshDirect are believed to be approximately $700 million.
The deal was consummated on January 5 less than two months after it was first announced. FreshDirect is still part of corporate Ahold Delhaize and not its U.S. subsidiary, Ahold Delhaize USA. The company’s structure was reset at the time with seven directors – five from Ahold Delhaize including Muller, McInerney and Siddiqi – and two from Centerbridge.
Other directors have not yet been publicly revealed, and one source told us that board members may be rotated over the next three years while Ahold Delhaize learns more about how a pure-play grocery delivery firm like FreshDirect best fits into the chain’s expanding omnichannel direction.
In 2018, FreshDirect relocated its corporate headquarters and its primary distribution center from Long Island City (Queens) to a new 400,000 square foot automated depot in the Bronx. The company now services parts of seven states including New York, New Jersey, Connecticut, Pennsylvania, Delaware, Maryland and Virginia in addition to the District of Columbia. The e-merchant also operates a smaller distribution center in Capitol Heights, MD (Prince George’s County).
Fresh food sales account for more than 60 percent of its volume.
Burris To Exit As C&S Will Supply Albertsons Mid-Atlantic With Frozens
In a deal that lasted less than a year, Burris Logistics is yielding control of Albertsons’ Mid-Atlantic division’s frozen food business which supplies approximately 275 Acme and Safeway stores in Connecticut, Delaware, Maryland, New Jersey, New York, Pennsylvania, Virginia and Washington, DC.
Effective late June, C&S Wholesale Grocers, based in Keene, NH will begin to supply all of the grocery chain’s Mid-Atlantic units with mainline frozen foods, ice cream, frozen bakery and frozen commodities. C&S will supply those stores from the same 220,000 square foot Harrington, DE distribution center that Burris owns.
Sources at Albertsons told us that Burris opted out of the deal, which was signed early last summer, because the arrangement was unprofitable for the Milford, DE-based logistics company. In recent years Burris has grown in such diverse areas as foodservice distribution (Honor Foods where a new $50 million distribution center was opened earlier this year in Philadelphia), cold storage warehousing (PRW Plus which operates 16 cold storage warehouses east of the Mississippi), freight brokerage (Trinity Logistics), and customized collaborative and transparent supply chain solutions (Burris Custom). The company also supplies all of BJ’s Wholesale’s frozen and refrigerated items at its approximately 220 club stores.
It is expected that much of the current sales and warehousing Burris workforce dedicated to Albertsons (an estimated 125 people) will be employed by C&S once the transition is completed. This change marks the end of a relationship that the family-owned distributor has had with Acme that dates back to 1925 when John W. Burris and his father Edward recognized an opportunity to deliver freshly baked bread to Acme Markets on return trips from delivering tomatoes from the farms in lower Delaware and Maryland to markets in Philadelphia. Three more generations of Burris family leadership have followed from John E. “Jack” Burris to Bob Burris to Donnie Burris, who is currently CEO.
About 15 months ago, Albertsons announced it would move distribution for its Safeway-Eastern division based in Lanham, MD from an Albertsons-owned warehouse in Upper Marlboro, MD to Acme’s larger and more efficient depot in Denver, PA near Lancaster. At the time, C&S was serving Safeway’s stores with frozen and Burris was supplying Acme’s approximately 160 units with frozen foods. Several months after the distribution consolidation was announced, Albertsons awarded the combined frozen business to Burris. Shortly thereafter, the two divisions also said they would be combining headquarters into Acme’s Malvern, PA facility and form a new division – Albertsons Mid-Atlantic division with a combined 275 stores and annual sales eclipsing $6 billion. Not expected to be integrated into the new supply deal at the outset are the 27 Kings and Balducci’s stores that Acme acquired at a bankruptcy auction earlier this year. However, when the chain completes the full integration of its newest purchase, those stores are expected to be added to the C&S roster, possibly this fall.
According to an email sent by the C&S procurement and merchandising teams to it vendors, “C&S will be managing and shipping this business through the current facility located in Harrington, DE with anticipated outbound shipping starting in late June 2021…test EDI (Electronic Data Interchange) purchase orders should be expected starting the first week of May in order to prepare for a smooth transition into the new facility. You should expect live purchase orders to begin transmitting in early June. As we prepare for the inbound receiving start in June, we ask for your continued partnership with the C&S Procurement and Merchandising teams, respectively, to ensure the highest possible service to our customers is maintained.”
‘Round The Trade
To understand the power of e-commerce during the pandemic, look no further than Amazon’s Q1 results where total sales reached $108.5 billion, a 44 percent jump. Profit for the 13-week period more than tripled to $8.1 billion. Other eye-popping metrics included a 32 percent increase in Prime members (who now number more than 200 million). In providing guidance for its second quarter, “Godzilla” said it expects a 24-30 percent volume increase. The company said that it is also moving its Prime Day shopping bonanza to June (from July) which should only help Q2 sales and earnings. However, when measuring physical store sales from the January through March period, Amazon posted a physical store revenue decrease of 15.5 percent (not including online-related business) from $4.64 billion to $3.92 billion, some of which could be related to matching March 2020 sales (when hoarding and panic buying began) to March 2021. Whole Foods, with more than 500 stores, comprises the biggest chunk of Amazon’s physical stores which also includes Amazon Fresh stores, its bookstores, Amazon 4-Star outlets, Amazon pop-up locations and 22 Amazon Go convenience stores, which in the past few weeks has closed four of its “Go” stores (two in Chicago, and one each in San Francisco and Manhattan).
More Amazon news: the National Labor Relations Board (NLRB) has begun to hear arguments from the Retail, Wholesale and Department Store Union (RWDSU) regarding its recent lopsided loss in its effort to unionize an Amazon fulfillment center in Bessemer, AL. The RWDSU has claimed that Amazon’s conduct prevented warehouse associates from freely exercising their choice. If I were a betting man, I’d go to the $100 window at Pimlico and wager that the union has no shot at overturning the election results.
Also being reported about Amazon: data firm Edge by Ascential forecasts that by 2025, it will surpass Walmart as the country’s largest retailer. Wouldn’t bet against that prediction…
And speaking about “Godzilla’s” biggest rival, I had a chance to read Walmart’s recently issued annual report and read with interest the company’s take on its growth strategy in the next year that includes continued investments in e-commerce and store remodelings, but not in new physical stores. “The success of this strategy will depend in large measure on our ability to continue building and delivering a seamless omnichannel shopping experience for our customers,” the report says, adding that a greater concentration of e-commerce sales, including increasing online grocery sales could lead to a drop in store and club traffic. The “Behemoth” also noted that it plans to spend almost $14 billion on capital investments in fiscal 2022 with most of that money allocated to e-commerce, supply chain upgrades, technology and store upgrades. E-commerce media firm Pymnts reports that Walmart+ has attracted more than 60 million subscribers since it was first launched eight months ago. While that appears to be substantial initial progress, Walmart has a long way to go to catch Amazon’s Prime membership which is nearly three times as large.
Lidl has named Michal Lagunionek as its new U.S. CEO, replacing Johannes Fieber who is stepping down to spend more time with his family. Fieber was named to the top Lidl post in the U.S. in 2018. Lagunionek was most recently president of the big discounter’s Poland unit and also serves on the board of parent company Schwarz Group. He becomes the fourth Lidl U.S. CEO in the past six years following Fieber, Brendan Proctor and Kenneth McGrath (now CEO of rival Save A Lot).
Bob Eddy, who last month was named interim chief executive of BJ’s following the unexpected death of Lee Delaney, has been named permanent CEO of the Westborough, MA-based club merchant. BJ’s also promoted three veteran executives to EVPs – Paul Cichocki will now become chief commercial officer; Laura Felice will assume Eddy’s former post as CFO; and Bill Werner was elevated to oversee strategy and development.
We’re just starting to see Q1 financial reports begin to appear (for those retailers using a calendar fiscal year) and the trendline is pretty clear – comps are usually settling in at between 1.2 and 2.4 percent. That group includes Weis, Ahold Delhaize USA and Publix. The one outlier that fell significantly below that range was Sprouts which experienced a 9.4 comp store sales decrease and a net earning decline of 9.8 percent, too. And there were two retailers with numbers that continue to impress. Albertsons posted an 11.8 percent comp store gain (largely driven by a 282 percent increase in digital sales). And then there was Costco which recently posted its April sales only. That jump was an eye-opening 30 percent rise in comp store volume. We received several calls and emails from retailers wondering how that could be in light of retail sales generally flattening out over the past months. The answer isn’t as difficult as it might seem. With Costco’s limited grocery item inventory, the nation’s largest club store operator was probably the hardest hit in terms of out of stocks a year ago when supply chain problems were at their peak. Couple that with the fact that Costco closed several of its key departments – jewelry, optical, hearing aids, food court – during the pandemic and you can see how Costco was able to comparatively make up lost ground from 12 months ago. It will be interesting to see where comp store sales go in Q2 which will encompass April, May and June. And clearly retailers are using proper logic when applying 2019 comparisons to their sales or using a two-year “stack” formula to accurately measure pre-pandemic, peak pandemic and ebbing pandemic revenue (even if Wall Street will likely punish them for drops in 2021 sales).
Local Notes
Several landlords and other sources have confirmed that some Shoppers Food stores might be sold in the next few months and that parent company UNFI’s original caveat of having buyers pay a pro-rated portion of Shoppers underfunded pension plan is now off the table. We’re told that that these stores (approximately six) were units that the landlords now control after they negotiated a deal with UNFI when the Providence, RI distributor/retailer first announced it was actively looking to sell its retail division (Shoppers and the much larger Cub Foods in Minnesota) in 2019. UNFI ultimately sold 13 of its then 43 stores to Lidl, Compare Foods and McKay’s. Prior to that it had been negotiating with Giant Food and Safeway to sell as many as 14 other stores with the attachment of assuming the pension plan for workers at those stores. Both Giant and Safeway walked away from those discussions and a few months later, UNFI temporarily suspended its attempt to sell Shoppers and Cub during the pandemic. Now that the huge sales gains reaped from COVID-19 have peaked, look for UNFI to once again put Shoppers on the active market soon. Landlords that have control of Shoppers’ leases will likely act even quicker in an attempt to get superior and more stable grocery retailers to anchor their centers. With the store sales in late 2019 and subsequent other store closures, Shoppers now operates 23 stores – 19 in Maryland and four in Virginia.
Another retailer we hear is attempting to sell stores in the market is Price Rite. Several sources confirmed that the discount division of Wakefern is looking to sell its four Maryland stores – Pratt Street in Baltimore City; Rosedale; Hyattsville; and District Heights. All stores currently remain open. After a strong start in the Old Line State, Price Rite has faltered – its merchandising isn’t as crisp and new competition from Lidl and additional Aldi units have adversely impacted sales. In recent years, two Price Rites have closed – Security Boulevard in Baltimore County and its first Virginia store in Woodbridge.
Speaking about another Wakefern division, ShopRite, I was dismayed to hear that a Baltimore County judge has acquitted the truck driver involved in the death of Klein’s ShopRite co-owner Andy Klein. Judge Mickey Norman dismissed two counts of gross negligence manslaughter by a motor vehicle and criminal negligence manslaughter by a motor vehicle against Carloo Watson. Judge Norman ruled that the state had not met the burden of proof to convict Watson. The whole event is so tragic – Klein was sitting in a line of traffic stopped at a red light on Route 24 in Bel Air, MD when the tractor-trailer driven by Watson plowed into a line of traffic killing Klein and seven-year-old Tripp Johnson. Andy Klein was simply a wonderful person – kind, benevolent and hard-working – and was beloved by his large family, company associates and the community.
One more ShopRite item: the 65,000 square foot ShopRite store located in the White Oak section of Silver Spring, MD, has been acquired by Giant Food. ShopRite shuttered its White Oak store in late February, which was one of two stores Wakefern member/owner Village Super Markets (along with a store in Timonium, MD) acquired from A&P at auction in 2011. The store originally opened in 1998 as a Super Fresh.
according to a story in the Rochester Democrat and Chronicle, Wegmans will not be bringing back its self-service cold and hot bars, at least in their original form. As it’s been doing for several months now, the uber-retailer will continue to offer many of those perishable items in pre-packaged configurations.
Foxtrot Market, the unique c-store concept that recently opened two stores in Washington, DC has named former Whole Food executive Mitch Madoff as its new senior VP of supply chain and Tae Strain as its corporate executive chef. The Chicago-based merchant, which opened its first store in hometown Chicago in 2014, now operates nine stores including five in ChiTown and two in Dallas. The announcement comes on the heels of Foxtrot receiving $42 million in Series B funding in February.
From the obit desk, we are saddened to report several passings. One of the greatest burlesque performers (strippers) of the past 75 years has died. Tempest Storm (born Annie Blanche Banks) left her native Georgia at the age of 14, eventually landing in Los Angeles where she began working as a cocktail waitress. Well, you can guess the rest. By the mid-1950s she was earning more than $100,000 a year and her breasts were insured by Lloyd’s of London for $1 million. Tempest Storm often told reporters that she never fully disrobed, stating, “I think taking off all of your clothes – and I’ve never taken off all of my clothes – is not only immoral, but boring. There has to be something left to the imagination. If you take everything off, you please a few morons and chase all of the nice people away.” She continued to perform until about a decade ago and was 93 when she died
An actress of sorts one could liken to a more modern-day Tempest Storm was Tawny Kitaen, who has also died. Kitaen is probably best-known for her role in “Bachelor Party” (1984), where she played the fiancée of a young Tom Hanks. She later gained greater notoriety by appearing in racy music videos for metal bands such as Ratt and Whitesnake, (she ultimately married Whitesnake’s leader singer David Coverdale). Later she married former baseball pitcher Chuck Finley. After a very promising start, Kitaen led a difficult life, troubled by substance abuse and unhappy relationships. At only 59, Kitaen left us way too early.
From the acting world we also lost Olympia Dukakis. The versatile actress, who won an Academy Award for her role as Rose, Cher’s cynical mother, in “Moonstruck” (1987), was best known for her raspy voice which she used to gain roles in which she played characters older than her real age. Other notable films in which she played powerful women include “Heartburn” (1986) and “Steel Magnolias” (1989). Dukakis, who was a cousin of former presidential candidate Michael Dukakis, was 89 when she passed.
One of the most notable yet unsung actors and producers of the past 80 years, Norman Lloyd, has left us. You may have never heard of Lloyd, and, if not, clearly his achievements would make you wonder why. He began his career in 1937 in Orson Welles’ theatrical production of “Julius Caesar.” He dangled from the Statue of Liberty in Alfred Hitchcock’s thriller “Saboteur” (1942), his first project in a long association with Hitch. And in the 1980s, he portrayed Dr. Auschlander in the TV hospital drama “St. Elsewhere.” In addition to 68 film and TV acting credits Lloyd served as a producer on 39 projects, including “Columbo” and “The Alfred Hitchcock Hour.” His last role was in the 2015 Judd Apatow flick “Trainwreck.” Not only did Lloyd have a long career, he also lived to be 106.
Another unsung personality, this one in the musical arena – Lloyd Price – has left us, too. Born and raised in New Orleans, Price, 88, recorded some of the biggest rock & roll hits of the 1950s, including “Lawdy Miss Clawdy,” “Stagger Lee” and “Personality.” Not only did Price have a powerful R&B voice, he also broke new ground by starting his own minority-owned label – Double L Records – in the 1960s (whose roster included a very young Wilson Pickett). He also controlled the publishing rights to his songs, something practically unheard of at the time. I had the pleasure of seeing Price perform at JazzFest in his hometown when he was in his late 70s and at that age, he could still dazzle an audience. Lloyd Price was inducted into the Rock & Roll Hall of Fame in 1998.