I can’t think of anyone in the nearly 50 years of writing about the food business that’s more altruistic and selfless than Jeff Brown, founder of Brown’s Super Stores, Inc., who confirmed on November 16 that he will be stepping away from the hugely successful business that he’s built over the past 34 years to run for mayor of Philadelphia in 2023. He is the first non-politician and fifth Democrat to enter the mayoral race. Current Mayor Jim Kenney is term-limited.
Brown, a fourth-generation grocer, followed in the footsteps of his father, Lenny, when he formed his own retail organization in 1988. Today that organization consists of 10 high-volume ShopRite stores and two Fresh Grocer units in Pennsylvania and New Jersey.
Many of Brown’s stores are located in underserved and economically challenged areas where Brown’s success has stemmed from hiring many economically-challenged minority residents to become part of his team which now includes about 2,500 associates. The veteran retailer also co-founded (along with his wife, Sandy) Uplift Solutions, a national non-profit group that develops entrepreneurial solutions to support underserved communities for the joy of a healthy life. Uplift Solutions focuses on workforce development and advocacy for justice-involved individuals.
This is a huge sacrifice for Brown and would be a tremendous challenge for anyone who attempts to lead a city that has been severely impacted by poverty, drug addiction and violent crime for decades. And while Philadelphia isn’t the only city in the United States facing these daunting issues, Philadelphia is among the most challenged, and in the seven years that Kenney has served as the city’s top leader, the problems have only worsened.
At the press conference officially announcing his candidacy – the chatter about Brown’s interest in becoming mayor has been steady for more than a year – the 58-yeard old merchant stated his three primary objectives should he be elected: dismantle structural poverty; rebuild the police so citizens feel safe; and increase the quality of life for the citizens and that begins with respect.
Prior to making his mayoral candidacy announcement, Brown confirmed that he was taking a leave of absence from his organization. The leadership team now consists of Paul Brauer president and COO; Sandy Brown, executive VP; and Josh Brown, one of Sandy and Jeff’s four children, who is CFO.
Running a dozen grocery stores is very tough; leading a city of 1.5 million in these difficult times will be significantly more demanding. However, Jeff Brown as a retailer stood out from most others because of his intelligence, passion and humanity.
If he is chosen to lead America’s sixth largest city, let’s hope he can deploy those skills to revive a city that’s been plagued by failure on many levels for many years.
‘Round The Trade
In the most recent Kroger-Albertsons update of what promises to be many more updates of the prospective merger, a hearing in Washington State to allow Albertsons to issue a one-time $4 billion dividend to its shareholders has been delayed until December 9. Currently, there is a temporary restraining order in effect in the Washington case preventing the Boise, ID-based chain from moving forward. In another federal lawsuit filed in DC (by California and Illinois and the District of Columbia), a federal judge ruled earlier this month that Albertsons could proceed with its dividend payout which was originally slated to be paid on November 7. However, that same federal judge – Carl Nichols – said he would not lift the order until the Washington State case was heard. Albertsons has vehemently challenged the states’ claim that issuance of the dividend that they claim would violate antitrust and consumer protection laws and could damage Albertsons financial stability. In this case, Albertsons and Judge Carl Nichols are right – Albertsons’ special dividend has nothing directly to do with antitrust issues and its balance sheet is more than healthy enough to sustain a $4 billion withdrawal. This is just another example of increasing government overreach. Of course, the bigger issue is store overlap and how the FTC draws its competitive roadmap. And the more I learn about current FTC chairwoman Lina Khan, the less optimistic I am about this deal ever happening. In her 17 months as the head of the government agency, she has attempted to block six mergers including the Penguin Random House/Simon & Schuster deal earlier this month.
In other “big boy” news, Amazon is expected to lay off 10,000 associates beginning later this month. According to the New York Times, divisions targeted for job riffs include devices, retail and HR. The layoffs would mark the largest job cut in its 28-year history, affecting 3 percent of its corporate employees and 1 percent of its global workforce. Ouch! And as earnings suffer, job cuts often ensue and so does plummeting stock value. On November 16, Amazon was a trading at $96 per share; a year ago that price was $183 per share (both numbers reflect a 20-1 stock split that it made in March 2022). That’s a huge decline, especially from a company so large and perennially successful as Amazon. And because of its size, its market cap and the difficulties it has recently faced, earlier this month “Godzilla” became the first publicly traded company to lose a trillion dollars (that’s trillion with a “T”) in market value in the course of a calendar year. In July 2021, the Seattle-based juggernaut plateaued at a Himalayan-like $1.88 trillion; currently Wall Street pegs Amazon’s value at about $880 billion. Double ouch, but don’t shed too many tears – “Godzilla” ain’t going away…according to the October Consumer Price Index (CPI), there was some relief for shoppers as total inflation dipped to its lowest level in almost a year – 7.7 percent – but there was only a modest decrease when it came to food prices – 10.4 percent compared with 11.2 percent in September. The Bureau of Labor Statistics (BLS), the government agency that issued the report, said all six grocery store indices remained elevated when looking at a 12-month comparison. Those include cereal/bakery products (+15.9 percent); dairy (+15.5 percent); non-alcoholic beverages (+13.4 percent); meat/poultry/seafood/eggs (+7.9 percent); fruits and vegetables (+9.3 percent); and other food at home (+15.4 percent).
On the digital front, according to research firm Brick Meets Click/Mercatus, total U.S. online grocery sales in October dipped 3.7 percent to $8.1 billion, the third consecutive month of declining online grocery sales.
RJ Sheedy has been named CEO of Grocery Outlet, replacing Eric Lindberg who will shift to becoming chairman of the Emeryville-CA-based discounter’s board of directors. Lindberg served as the franchised closeout chain’s chief exec for 17 years. Sheedy joined the retailer in 2012 and was named president in 2018. He will also join the board of directors.
Shortly before presstime, two of the country’s largest retailers – Target and Walmart – reported their Q3 sales and earnings and the results were a mixed bag. At Minneapolis-based Target, comp store sales increased 2.7 percent versus last year’s third quarter results. However, earnings continued to tumble, with profits declining nearly 50 percent to $1 billion. Veteran CEO Brian Cornell was quick to address the problems, noting that consumers’ “shopping behavior is increasingly impacted by inflation, rising interest rates and economic uncertainty.” The ex-PepsiCo sales executive also said that his company would undertake an enterprise-wide effort to simplify and gain efficiencies across its business with a focus on reducing complexities and lowering costs all while continuing to support its team. Cornell believes his company can save $2-$3 billion over the next three years if they are successful. Earlier this month, Target opened the first of its new generation of stores in Katy, TX. The new full-sized unit (150,000 square foot) is unique in that it features a large backspace area (13,000 square feet) to accommodate online orders for same-day pickup. Next year, about 30 new stores of all sizes will feature some of the elements of the Katy store as will about half of its 200 planned remodeled stores. In 2024, more features will be added to more closely resemble the Katy model. At Walmart, the results continue to be surprisingly strong. Total Q3 revenue was $152.8 billion and same store sales increased by a very healthy 8.7 percent thanks in large part, but not totally, to inflation. In fact, the “Bentonville Behemoth” improved both its transaction count (not related to inflation) and its average “ring” (definitely inflation-related). Walmart CEO Doug McMillon said: “We had a good quarter with strong top-line growth globally led by Walmart and Sam’s Club U.S. and Flipkart (India e-commerce) and Walmex (Mexico/Central America). Walmart U.S. continued to gain market share in grocery helped by unit growth in our food business. We significantly improved our inventory positioning in Q3 and we’ll continue to make progress as we end the year.” The key takeaway: Walmart is still growing units, while many other retailers are lagging behind on unit movement, which sometimes is often being cleverly disguised by highlighting dollar sales. While I’m happy to hear virtually all retailers are maintaining healthy sales results, the challenges remain obvious. Whereas I expect comp store revenue to remain good in Q1 of 2023 and solid in Q2, I fear the pain points will come in the latter half of next year, particularly during the important holiday season. I hope I’m wrong. One more Walmart note: the world’s largest merchant said it will roll back prices on traditional Thanksgiving and Christmas items (turkey, ham, stuffing, etc.) to last year’s levels through December 26. That couldn’t outdo Aldi, which said it will reduce prices on popular Thanksgiving products to 2019 levels, with discounts that range from 15-30 percent from Aldi’s current everyday low prices. Touché!
To steal a Bob Dylan line – “Could This Really Be the End…? It really looks like the last days of Sears are finally upon us. After more than 10,000 court filings (which will create generational wealth for dozens of lawyers) and a four-year stay in Bankruptcy Federal Prison, Sears Holdings has been freed, only to find that the Emperor has no clothes. In the halcyon days of Sears, the company operated about 3,500 stores and held a unique niche in American retailing with brands like Craftsman, DieHard and Kenmore. Then “Not So Fast” Eddie Lampert acquired the company in 2005, and the rest reads like a Greek tragedy. And I wasn’t kidding about the Emperor having no clothes – today there are only 21 stores still open including four in the Mid-Atlantic and New England (Jersey City, NJ: Camp Hill, PA, Braintree, MA; and Frederick, MD). What’s the over/under that all Sears stores will close by the end of next year?
Local Notes
Kudos to the Redner family and their team. After an eight-year wait, the company’s newest store, a 49,000 square foot conventional supermarket (yes, there are still supermarket ribbon cuttings) debuted in beautiful Lewes, DE. This is the second “from the ground up” store that the family-managed ESOP has opened using its beautiful “Fresh Market” format (the first unit opened in October 2019 in Audubon, PA and several existing stores have also been remodeled to the “Market” units) and judging by the demographics of the area (including steady population growth) the store will be a hit. BTW, the Reading-based retailer, which operates 45 supermarkets and 21 Quick Shoppe c-stores in Pennsylvania, Delaware and Maryland, quietly surpassed the $1 billion sales market earlier this year.
Some more financial stuff from retailers that do a lot of business in the Mid Atlantic. At Ahold Delhaize USA, comp stores sales jumped 8.2 percent in its recently completed third quarter (ended October 2) and online revenue increased 20.8 percent over the 13-week period. Underlying operating margin in the U.S. was 5.0 percent, up 0.2 percentage points at constant exchange rates from the prior year period but results were impacted by a $193.8 million impairment charge against its online grocery delivery service FreshDirect. As it’s been for several years, Food Lion continued to lead brand performance, celebrating 40 consecutive quarters of positive sales growth.
At rival Weis Markets, the numbers remained robust. In its Q3 ended September 24, the Sunbury, PA-based regional chain posted overall sales of $1.15 billion, an 8.2 percent increase while comp store revenue grew by 7.9 percent. “We remain grateful to our associates who are helping us work through the challenges of an inflationary environment to achieve our elevated current year expectations,” chairman, president and CEO Jonathan Weis said in a statement. “As customers look for more ways to save, the Weis Gas Rewards Program, Weis Quality private-label products, and our ‘Low, Low Price’ programs offer strong value. We will build on our value proposition in the fourth quarter, when customers can earn a free turkey or ham for their holiday celebrations based on their purchases.” Operating results were equally as strong, with the family-controlled merchant earning $28.5 million in profit, slightly better than the company’s 2021 Q3 net.
In other Weis news, Maria Rizzo has been promoted to VP-advertising and marketing, replacing Ron Bonacci who is retiring at the end of the year. I’ve known Maria for a long time (she joined Weis in 2006) and her strong work ethic, talent and ability to work with others makes this a great choice. As for Senor Bonacci, I only have praise for the industry veteran who joined Weis in 2017 after stints at Food City (K-VA-T) and Kroger. Ron brought discipline and professionalism to Weis’ marketing and ad group and we wish him all the best in his future endeavors…
Some current and future New York Metro store openings to report. On November 18, BJ’s opened a new 105,000 square foot club unit in the Willowbrook Mall in Wayne, NJ at the site of a former Sears store (see “Emperor has no clothes” earlier in this column). This is BJ’s 24th club store in the Garden State and 234th chain-wide. And Aldi will open its first store on Staten Island next year. While no specific location has yet been revealed, sources told us that the Greenridge Shopping Center in the Eltingville section of SI is where the store will be built.
After the Amazon Labor Union’s (ALU) fulfillment centers near Albany, NY and in Moreno Valley, CA and the Trader Joe’s store the Williamsburg section of Brooklyn all voted against unionization, do you want more evidence that the so-called revitalized movement to organize some retailers is waning? At a Home Depot store on Roosevelt Boulevard in Philadelphia, store associates also shot down an attempt to unionize by a one-sided 165-51 vote. That was the first store election ever held at the world’s largest home improvement retailer in its 44-year history. While it’s clear that the union revival effort isn’t going away anytime soon, it’s also pretty obvious that those companies that treat their associates fairly, will find that only a small percentage of their associates are likely to become union members.
Sadly, some obits to report this month. Dan Katz, 57, co-president (along with his brother Noah) of family-owned PSK Supermarkets and chairman of retail co-op Allegiance Retail Services, passed away last month. Although I did not know Dan as well as many, the times I met him I was impressed with his 30-pound brain and his passion. He loved the business and really enjoyed helping others. And judging by the many emails we’ve received about Dan Katz, it is clear his many friends and associates appreciated his intelligence and humanity. His passing at such a young age is a big loss. Dan Katz will certainly be missed by many in our industry.
Ray Guy is also no longer kicking. The only punter to be inducted into the NFL Hall of Fame (in 2014) passed away earlier this month at the age of 72. Guy, who played at Southern Mississippi University, was a first-round draft pick of the Oakland Raiders in 1973, making him the first punter ever to be drafted in the first round. During his career, Guy made the Pro Bowl seven times and was a key player in three Raiders Super Bowl championships (two in Oakland and one in Los Angeles). The lanky 6’3” Georgia native was the first punter that I can remember who could both elevate the ball to majestic heights (preventing long runbacks) and use the “coffin corner” kick to pin opponents inside their own 10-yard line. The late John Madden, the Hall of Fame coach, who drafted him and coached him until 1978 said: “Ray Guy was a football player who punted. When we first drafted him, it was a heck of a choice. I thought then he could be the greatest in the league, but I changed my mind. I think Ray proved he’s the best of all time.”
Gallagher, whose rants about the difficulties of life’s everyday matters that culminated in smashing watermelons with a sledgehammer, will not be visiting any more produce departments. The comedian, whose first name was Leo (he refused to reveal it for many years) died last month at the age of 76. During his career, which lasted nearly 35 years, the mustachioed comedian played more than 3,000 concert dates and obliterated an estimated 15,000 watermelons. BTW, I’m happy to report that another Gallagher is alive and well. That would be Kevin Gallagher, our ace Metro New York jack-of-all-trades and all around bon vivant (no watermelons, only insertion orders)!