For years, Wegmans clamored to open a store in Connecticut. After all, many potential areas in the Nutmeg State checked off the two demographic boxes that the Rochester-based uber-retailer desires: significant household income and advanced educational levels all in a densely populated area.
I can remember having that “Connecticut conversation” with Wegmans executives dating back to the late 1990s, but the company could never close the type of deal it wanted. Things began to change eight years ago when the high-volume merchant opened the first of its downsized stores (80,000 square feet) in affluent Chestnut Hill, MA. Reducing its store size (from 105,000-125,000 square feet) was a huge concern for the retailer and it took nearly a year of store planning to ensure that the smaller footprint would not adversely impact Wegmans’ strong perishables and customer service image, which have been hallmarks of the regional chain for more than 100 years.
Once it opened in April 2014, it didn’t take long for the Chestnut Hill unit to become one of the top sales per square foot “earners” in its entire fleet and Wegmans has continued to prioritize its reduced footprint to the point where virtually all new stores will be under 100,000 square feet in size. Thinking smaller has also helped the company gain locations in areas where it would have been virtually impossible to build older model larger stores such as Brooklyn, Washington, DC (opening later this year), and Manhattan (projected opening in 2023).
The Nutmeg State’s wait is over. Earlier this month, the family-owned merchant announced it will open its first Connecticut location in tony Norwalk, smack in the middle of Fairfield County, one of the wealthiest counties in the U.S. The new store, which will sit on an 11-acre site, is expected to open in 2024 or 2025.
Norwalk is also notable for being the home of Stew Leonard’s flagship “dairy” store which opened in 1969. I can’t think of two retailers that are more similar in style than these two fresh food stylists. This will be the first time the two companies will direct compete with each other, although some may argue that there is some crossover between Stew’s Yonkers, NY store and Wegmans’ Harrison, NY unit which opened in 2020. However, those two mega-units are 14 miles apart. Similarly, Wegmans Montvale, NJ store (which opened in 2018) and Stew’s Paramus, NJ location (a former Fairway Market which opened in 2020) are about nine miles apart.
The distance between the two Norwalk stores is approximately four miles and the store sizes will be about equal (Stew’s is 103,000 square feet; Wegmans will encompass about 95,000 square feet). Wegmans might have a superior location (right off of I-95) but Stew’s has tremendous customer loyalty and the Leonard family is thought of as royalty for their commitment to community and philanthropic causes.
Wegmans remains fearless and undaunted in its expansion efforts – it is able and willing to compete with all existing competitors once it is assured that a specific store location fits the merchant’s demographics and real estate is available. This mindset has been in place since the retailer began to expand beyond western New York. Its first “new wave” store opened in Princeton, NJ in 1999 and it was pitted against Metro NY market leader ShopRite. In Baltimore-Washington, it went head-to-head with Giant Food which has dominated that market for more than 60 years. Similarly, in the Boston area, it took on Stop & Shop and Market Basket; in the Delaware Valley it battled with established competitors Acme and The Giant Company; and in newer markets such as Richmond, where it was matched against another market newcomer Publix as well as established market leaders Walmart and Kroger (BTW, Wegmans is dominating Publix), it has fared well. The same holds true in the Research Triangle of North Carolina (Raleigh-Durham-Chapel Hill) where it is effectively making inroads against established merchants Walmart, Harris Teeter, Food Lion and Publix (also a relative “rookie” in that market). And if you were to evaluate Wegmans’ new market entry “batting average” against traditional supermarket players and Walmart, I’d say that some ShopRite locations, Market Basket and Walmart have provided Wegmans with its greatest challenges.
You can add Stew Leonard’s to your heavyweight boxing card, too. Potentially about $1.5 million in weekly sales would be up for grabs which will certainly come from Stew’s and other retailers that currently compete with Stew’s (although Stew Leonard’s will battle hard to retain its customers and volume).
Of course, other existing operators will have a say in what is certain to be a battle royale when Wegmans cuts the ribbon on its Norwalk store. And I predict that all current retailers will feel the volume thud (to varying degrees).
Probably Costco, which will be located very close to the new Wegmans, has the best chance to retain most of its current sales. Why? Because it offers shoppers in Fairfield County the most differentiated option against Wegmans and Stew’s. In nearby Darien, I see Whole Foods also holding its own because of its organic/natural mantra which holds a lot of sway with younger customers. Also in Darien, the 11,000 square foot Trader Joe’s should survive the slugfest because, somewhat like Whole Foods, its brand has created a strong bond with its customers for many years. Over in Norwalk are two underwhelming Stop & Shops, a ShopRite supermarket (Cingari) that is below average by ShopRite standards, and a discount Walmart with a limited food presence and virtually no fresh product.
It’s still a little early to set your clocks. But when launch time is near, this will be an interesting dogfight to watch. Unless you’re an existing retailer.
Costco Posts Double Digit Sales
“The Costco Express” keeps rolling along. The Issaquah, WA-based club operator posted stellar sales, comp store revenue and earnings in its second quarter which ended February 13, and those number are compared to a very strong Q2 last fiscal year. Overall sales in the 12-week quarter increased to $50.94 billion, up 16.1 percent (including membership fees which increased 9.8 percent to $967 million in Q2). Comparable store revenue skyrocketed by 11.1 percent (excluding gas) year-over-year.
“Traffic, or shopping frequency, increased 9.3 percent worldwide and was up 8.3 percent year over year in the United States. Our average transaction or ticket was up 4.6 percent worldwide and up 6.9 percent in the U.S. during the second quarter,” chief financial officer Richard Galanti, Costco’s CFO, told analysts at the post-earnings release conference call.
“In Q2, our core-on-core margin was lower by 28 basis points year over year, approximately two-thirds of this coming from fresh foods and a little from food and sundries and nonfoods as well. Fresh continues to lap exceptional labor productivity and low product spoilage that occurred from outside sales a year ago in the second quarter,” the veteran Costco executive explained.
E-commerce sales also increased 12.5 percent in Q2. “Stronger departments in e-commerce in terms of year-over-year percentage increases were jewelry, tires, special or kiosk items, patio and garden, and home furnishings. Our largest online merchandise department, majors – which consists of consumer electronics, appliances, TVs, etc. – was up in the high-single digits on very strong sales increases a year earlier,” Galanti said.
In related Costco news, the high-volume merchant announced that it has elevated Claudine Adamo to executive VP and chief operating officer for merchandising. She fills the role recently held by Ron Vachris, who last month was promoted to Costco president and COO.
“Claudine has been with us for 30 years,” Galanti said. “She began in an hourly position in our Kirkland [WA] warehouse in 1992 but a year later came into buying and has been in buying ever since. Most recently, she was senior VP of non-foods merchandising. Again, she’ll be taking over, looking over all of merchandising.”
At the end of its second quarter, Costco operated 828 warehouse clubs overall, compared with 804 a year ago. Currently, the national club store leader operates 572 clubs in the U.S. and Puerto Rico; 105 in Canada; 40 in Mexico; 30 in Japan; 29 in the United Kingdom; 16 in Korea; 14 in Taiwan; 13 in Australia; four in Spain; two in France and China; and one in Iceland. Galanti noted that in fiscal 2022, plans call for 32 new club stores, including four relocations. Cap-ex for Q2 was approximately $723 million, and our full year cap-ex Costco is expected to allocate about $4 billion for investments.
‘Round The Trade
Howard Schultz is back. Again. Yes, that’s right, “Mr. Starbucks” is stepping back into the CEO chair on an interim basis. The Seattle-based coffee juggernaut announced that “Humble Howie” will once again assume the company’s top job after current chief executive Kevin Johnson retires on April 4. This will mark the third time that Schultz will serve the company he helped build as its CEO. After holding that title from the mid-1980s until 2000, he yielded day-to-day leadership to Orin Smith. In 2002, Schultz dipped into the supermarket arena to pluck Jim Donald to serve as president of its North American unit. Three years later, Donald was named CEO. He lasted until 2008, when Schultz stepped back in as chief executive and remained until 2017 when Johnson was named to the company’s top post. Howie said he is only staying until a new CEO is named probably by this fall…the “blue light” is finally turning black. After staging one of the longest death spirals in retail history (comparable to A&P’s – remember them?), Kmart is closing its Avenel, NJ store on April 17. That leaves only three stores remaining for the once-mighty mass merchant – Westwood, NJ, Bridgehampton, NY (Suffolk County) and Miami, FL.
Local Notes
Shippensburg, PA will be the home of a new Walmart distribution center. The 1.8 million square foot depot will serve as a fulfillment center for the “Bentonville Behemoth’s” rapidly growing e-commerce business. Unlike its conventional warehouses, the new facility will essentially serve as a holding warehouse until orders are selectively picked, packed, shipped and then delivered directly to its e-commerce customers. The Shippensburg DC is expected to create about 600 new jobs…Village Super Markets posted strong comp sales and earnings in its recently completed (January 29) second quarter. The second largest Wakefern member saw overall sales increase $2.8 percent to $537.4 million and comp store revenue jumped 4.4 percent. Earnings, too, were very healthy, up 122 percent to $10.1 million. While the Springfield, NJ based ShopRite operator posted flat e-commerce sales in Q2, the high-volume merchant noted that e-commerce revenue has risen 154 percent on a two-year stack, including a 176 percent digital sales jump in the corresponding period a year ago. “Sales increased due to an increase in same-store sales of 4.4 percent, partially offset by the closure of the Silver Spring, MD, store in February 2021. Same-store sales increased due primarily to increased sales in New York City stores, retail price inflation and continued growth in Supplemental Nutrition Assistance Program (SNAP) benefit redemptions,” the company stated. Village Super Market, owned by the Sumas family, currently operates 34 stores including 29 ShopRite stores, five Fairway Markets and three Gourmet Garage specialty stores in Manhattan. Its stores are located in New Jersey, New York, Maryland and Pennsylvania…at ShopRite parent firm Wakefern, the wholesale cooperative is still screening candidates to participate in its one-day “Own Brands Supplier Innovation Summit.” From March 7-28, private label suppliers can submit applications online through product discovery, sourcing, and purchasing platform RangeMe. Once submitted, Wakefern Own Brand category managers will review submissions and invite suppliers to a virtual pitch meeting. Finalists selected after the virtual pitch meeting will then be invited to a one-day summit in June at Wakefern headquarters. During the one-day summit, suppliers will present their innovative products to a panel of Wakefern executives for potential addition to the Bowl & Basket or Wholesome Pantry brands. Wakefern said it will not be accepting submissions for non-food items, supplemental and nutritional items, or baby food. All other food items will be considered. Applicants must provide a complete and accurate description of the product and product line, including a brand profile, to be considered. “We are excited to announce the official launch of our Own Brands Supplier Innovation Summit,” said Chris Skyers, VP-Own Brands at Wakefern. “Since launching Wholesome Pantry and Bowl & Basket, Wakefern’s own brands have experienced consistent growth. Our retail banners have our consumers’ trust, creating a need for new and innovative products and line extensions to meet the brand’s rapid expansion and consumer loyalty. To meet this demand, we are searching for new ideas and products to bring to market. Our search will cap off with an exciting one-day summit in June, when we will connect and network with manufacturers to learn about innovations at the forefront of the industry. Our end goal is to form long-term partnerships with manufacturers to expand our popular store brands.”…BJ’s plans to open four new clubs in 2022, including two in the Northeast – Greenburgh, NY (Albany region) and Canton, RI…strong move by Weis Markets naming Mike Gross as its new VP-center store sales and merchandising. Mike’s a seasoned pro who’s extremely knowledgeable about the business. As importantly, he worked with both Bob Gleeson, Weis’- senior VP-merchandising and marketing, and COO Kurt Schertle when the trio all toiled for Shoppers Food.
We have a few obituaries to report this month including Charles Entenmann, 92, who along with his brothers, Robert and William, took a small Long Island family bakery and helped expand it into a national brand. In 1976, the company went public and two years later it was sold to pharmaceutical firm Warner-Lambert. From that point until 2002, Entenmanns’ ownership has been somewhat of a roller coaster ride. Owners during that period included General Foods/Kraft, CPC International/Best Foods, Unilever and Canada-based George Weston, before it was sold to Grupo Bimbo in 2002. Bimbo remains the company’s owner today. With his passing there are no remaining Entenmanns linked to the company that was founded in 1898.
From the acting world, I am sad to report the death of William Hurt, a truly great actor who earned an Academy Award for Best Actor in the 1985 film “Kiss Of The Spider Woman.” He was also nominated in the same category for two other films – “Children Of A Lesser God” (1986) and “Broadcast News” (1987). Before he made his sensational debut as a lead actor in “Altered States” (1980), Hurt was already an established theater performer. His intense, personalized style made him popular with both movie fans and critics and even later in his career, when he became more of a character actor, he never lost the ability to strongly connect with his audience. Hurt’s career that spanned more than 45 years and included 106 film and TV roles. He continued to act up until his death at age 71.
We lost another notable keyboard player in the past month. Bobbie Nelson will no longer be tickling the ivories. The sister of Country Music Hall of Famer Willie Nelson, Bobbie, 91, was really the musical foundation of the Nelson family. Before Willie began playing clubs in his native Texas, Bobbie was already playing honky tonks as a teenager. After she left the music industry for more than a decade to raise a family, her brother, by then a star, asked her to join a new band he was forming. That was in 1972 and Bobbie continued to serve “the Family Band’ as its piano player until 2021. “Her elegance, grace, beauty, and talent made this world a better place. She was the first member of Willie’s band as his pianist and singer. Our hearts are broken and she will be deeply missed,” said the Nelson family in a statement.