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- 2012 - January - 16th -

Lynch departure could signal move of Winn-Dixie HQ

by Mark Basch

When Winn-Dixie Stores Inc. last month announced an agreement to be acquired by Bi-Lo LLC, it left open the question of where the merged Fortune 500 company’s headquarters will be: Winn-Dixie’s home in Jacksonville or Bi-Lo’s offices in Greenville, S.C.

While the companies still haven’t answered that, we may have received a clue Friday when Winn-Dixie CEO Peter Lynch announced he will leave the company after the merger, with Bi-Lo Chairman Randall Onstead taking over as president and CEO of the combined company.

The plan is for Winn-Dixie and Bi-Lo to continue to operate their combined 690 supermarkets under their current names, and they have said they will continue to maintain a strong corporate presence in both Jacksonville and Greenville after the merger.

But if Onstead is the head of the company, it seems reasonable to speculate that Greenville will be the official headquarters.

Shoppers might not notice any difference. Like Winn-Dixie, Bi-Lo has been undergoing a store remodel program to turn the company around after emerging from Chapter 11 bankruptcy (Winn-Dixie in 2006 and Bi-Lo in 2010). Both Winn-Dixie and Bi-Lo offer shoppers the “fuelperks!” program that allows customers to earn gasoline discounts as they buy groceries.

Lynch said last month that the corporate cultures of the two supermarket chains are a good fit.

Lynch is well thought of in the industry. When he joined Winn-Dixie in December 2004, analysts said he was absolutely the right man for the job of turning Winn-Dixie around. But they also said he was the right man at the wrong time, because Winn-Dixie probably should have brought him in a couple of years earlier.

Sure enough, Winn-Dixie filed for Chapter 11 two months later. But Lynch stayed on through the 21-month bankruptcy process and began efforts to move Winn-Dixie forward when it completed Chapter 11.

Although Winn-Dixie’s store remodel has been moving along slowly, Lynch has continually expressed confidence that the company is on the right track. It will be interesting to see if Winn-Dixie stays on the track under new management.

Food Lion frenzy didn’t last

When I moved to Jacksonville in 1987, the biggest business story that week was the frenzy surrounding the opening of the area’s first Food Lion supermarket.

People actually lined up outside the door waiting to see what wonders the new store could bring. It was an amazing sight.

It looked as if Food Lion would be a formidable competitor to the two supermarket companies entrenched in Northeast Florida, Winn-Dixie and Publix Super Markets Inc., as it opened stores throughout the area in the late 1980s and early 1990s.

But by the mid-1990s, the bloom was off the rose. Food Lion’s sales dropped following a controversial 1992 report on ABC-TV’s “Prime Time Live” that alleged unsafe food practices in Food Lion stores. The company had a hard time winning back its reputation in the Jacksonville market.

Whatever competitive advantage Food Lion might have had as a low-price leader disappeared when Walmart entered the local grocery market. Food Lion had no chance trying to compete on service. Food Lion spokeswoman Christy Phillips-Brown told the Daily Record last week that its Jacksonville-area stores average about 35 employees. In comparison, an average Publix supermarket has between 110 and 125 employees, spokesman Dwaine Stevens said.

Food Lion began closing stores in the market in 1994, and in 2001 it closed its local distribution center in Green Cove Springs. Last week, the company announced it would shut its remaining 20 Food Lions in the Jacksonville metropolitan area within 30 days.

Food Lion’s parent company, Belgium-based Delhaize Group, announced it was closing a total of 113 Food Lion stores because they were underperforming, saying it wanted to focus its resources on future growth in other areas.

Delhaize made the announcement as it reported disappointing fourth-quarter sales results. Comparable store sales in its U.S. operations fell 0.4 percent in the quarter.

“Overall demand remains soft in the Southeast, and Food Lion’s value position is not compelling enough, we believe,” Jefferies & Co. analyst James Grzinic said in a research report.

Delhaize operates 3,408 supermarkets in the U.S., Europe and Indonesia under a number of different brand names, but the U.S. is its largest market with 1,605 stores and 65 percent of total sales.

The U.S. stores are located in 16 eastern states. The company is taking Food Lion completely out of Florida but there still will be 1,127 Food Lions in 10 states.

Delhaize still has two other small grocery chains in Florida, Sweetbay in West-Central Florida and Harveys, which also operates in parts of Georgia and South Carolina.

The company’s other brands include Hannaford in the Northeast and Bottom Dollar Food, a Mid-Atlantic brand that focuses on smaller stores and low prices.

Food Lion is trying to remake its stores with a new brand strategy “which includes being recognized as a price leader, making our stores easier to shop, offering the greatest value in private brands and providing fresh produce,” Food Lion President Cathy Green Burns said in a news release last week.

But the company apparently doesn’t think a new strategy would allow it to be competitive in Florida.

Food Lion expects the strategy to be “substantially complete” throughout its store network by the end of 2012. That’s part of an overall strategic initiative to boost profits announced by Delhaize in 2010 called its “New Game Plan.”

Despite the efforts to remake the company, Delhaize’s stock has dropped 26 percent over the past year in trading on the Brussels exchange, according to Bloomberg News. Grzinic doesn’t expect the stock to make much of a recovery in the near future.

“While we are encouraged by the early success in repositioning the U.S. proposition more competitively, we see a step up in Walmart’s competitive impact in the U.S. (both through gross margins and accelerated openings). With the backdrop challenging in other markets, a discount valuation is here to stay,” Grzinic said.

Vulcan takeover could be bad for Jacksonville

As Martin Marietta Materials Corp. and Vulcan Materials Co. continue to snipe at each other, one aspect became clear last week.

If Martin Marietta is successful in its hostile takeover of Vulcan, it would probably be bad for Jacksonville.

Birmingham, Ala.-based Vulcan has maintained a Florida headquarters in Jacksonville since the company acquired Florida Rock Industries Inc. in 2007.

In December, Vulcan announced a corporate restructuring into four divisions, including a South region headquartered in Jacksonville. The other divisions are an East region headquartered in Atlanta, a Central region based in Birmingham and a West region based in Los Angeles.

But in an investor conference call last week, Martin Marietta CEO Ward Nye derided that restructuring plan.

“We don’t believe a company with a national footprint should locate three of its four division headquarters in the Southeast. One could probably drive from their new division headquarters from Jacksonville to Atlanta or Atlanta to Birmingham on a single tank of gas, with minimal bathroom breaks,” Nye said, according to a transcript of the call posted in a Securities and Exchange Commission filing.

It sounds as if Nye doesn’t see much need for the Jacksonville office.

After unsuccessful merger talks between the two construction materials companies, Martin Marietta last month announced a $4.8 billion takeover bid that it is taking directly to Vulcan shareholders. Vulcan’s board of directors has recommended that shareholders reject the offer, but Martin Marietta is continuing with the hostile takeover attempt with no clear resolution in sight.

Global Axcess expanding

It looks like Global Axcess Corp. is in an expansion mode.

The Jacksonville-based company, which operates automated teller machine and DVD kiosk networks, announced a deal last week to buy 50 ATM sites from an undisclosed company for $215,000.

Global Axcess, which reported total revenue of $24.3 million in the first nine months of 2011, said the deal will add $400,000 in revenue.

That announcement came a week after Global Axcess announced a new $3 million credit facility to finance merger and acquisition activity.

“This transaction continues our aggressive efforts to accelerate our ATM growth and profitability through additional strategic asset purchases,” interim CEO Lock Ireland said in last week’s news release.

Global Axcess owns or operates about 5,300 ATMs and DVD kiosks in 43 states.

Body Central reports sales growth

Body Central Corp. last week reported that total fourth-quarter revenue rose 20 percent to $80.7 million and comparable store sales rose 7 percent.

The Jacksonville-based fashion retailer also said it expects earnings for the quarter to be between 36 cents and 37 cents per share, at the high end of its previous forecast. The average forecast of analysts surveyed by Thomson Financial had been at 37 cents.

Analyst sees further gain in Rayonier stock

Rayonier Inc.’s stock reached a record high of $45.65 last week, but at least one analyst thinks it can rise even farther.

RBC Capital Markets analyst Paul Quinn initiated coverage of the Jacksonville-based forest products company last week with an “outperform” rating and a $55 price target.

“With pricing trending higher for specialty dissolving pulp and conditions ripe for a recovery in timberland markets, we believe Rayonier represents an attractive investment opportunity,” Quinn said in his research report.

Quinn also forecasts Rayonier to raise its dividend from its current annual rate of $1.60 a share to $1.80 by the fall and to $2.20 next year.

mbasch@baileypub.com

356-2466

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