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Bi-Lo Holdings LLC, which owns Winn-Dixie Stores Inc., is preparing an initial stock offering, according to the Reuters news service. Bi-Lo stores operate in North and South Carolina, Georgia and Tennessee, including this one in Chattanooga.
Jax Daily Record Monday, Aug. 26, 201312:00 PM EST

Potential IPO suggests Bi-Lo Holdings LLC is doing well

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by: Mark Basch Contributing Writer

We haven't seen any financial data on Bi-Lo Holdings LLC since the privately owned supermarket company acquired Winn-Dixie Stores Inc. last year, but we have to assume everything is going well.

That's because, according to a Reuters news service story last week, Bi-Lo has hired a group of investment banks to underwrite an initial public offering.

Officials of the Jacksonville-based company wouldn't comment on the Reuters report, which cited unnamed sources, but it's reasonable to assume that the IPO is actually in the works.

Wall Street types love to gossip and the Reuters report indicates they have been chattering about a Bi-Lo IPO.

An IPO has seemed inevitable ever since Bi-Lo and Winn-Dixie merged in March 2012. The company is owned by Dallas-based private equity firm Lone Star Funds. When an investment firm like this buys a business, the usual pattern is that the investors look to cash in by selling the company or selling stock via an IPO once the business is on a sound, profitable footing.

So, if Lone Star is planning an IPO for Bi-Lo, that's a good signal for the company's finances.

Lone Star also could be motivated by the recent strength of the IPO market. In a generally good year for stocks, the second quarter was the most active quarter for IPOs in nearly six years, according to IPO research firm and investment manager Renaissance Capital in Greenwich, Conn. The firm also said there is a strong pipeline of deals to keep the market busy for the rest of this year.

The market for IPOs by specialty grocery chains was particularly strong. This month, Phoenix-based Sprouts Farmers Market Inc. went public at $18 a share, and the stock more than doubled to $40.11 on the first day of trading.

Bloomberg News reported that the 123 percent gain was the best opening-day performance for an IPO in more than two years.

Another grocer in the fresh, natural and organic food sector, New York-based Fairway Market, also had a strong reception. Its parent company, Fairway Group Holdings Corp., didn't jump as far as Sprouts immediately but after going public at $13 a share in April, it has reached a high of $28.87.

The popularity of specialty grocers isn't a new phenomenon. The Fresh Market, the Greensboro, N.C., chain that has stores in the Jacksonville area, rose 46 percent on its first day of trading in 2010 and has produced a 146 percent return since its IPO, Renaissance said.

The market for conventional supermarket chains like Bi-Lo is more uncertain, said analyst David Menlow, president of IPOFinancial.com in Green Brook, N.J. There have been few IPOs of conventional chains in recent years.

The only comparable recent IPO Menlow could find is a Milwaukee-based chain called Roundy's Inc., which operates 161 supermarkets in the Midwest.

Roundy's IPO was priced at $8.50 in February 2012 and while the stock has recovered after dipping as low as $3.69 early this year, the stock has recently been trading close to its IPO price. The conventional grocer didn't generate the same excitement as the specialty grocers.

Bi-Lo, once it completes the planned acquisition of three smaller grocery chains from the Delhaize Group, will have about 850 stores in the Southeast. It continues to operate stores under both the Winn-Dixie and Bi-Lo banners since the merger.

Its annual sales should be more than $10 billion, making it the second-largest Jacksonville-based company behind CSX Corp.

Stores magazine this month ranked Bi-Lo at the top of its list of "hot 100 retailers," based on its 353 percent sales growth from 2011 to 2012. However, that "growth" is completely misleading, because it resulted from the addition of the Winn-Dixie stores into its sales data.

Unfortunately, we won't really know how hot Bi-Lo is unless it files documents for an IPO, which will show its finances. Although it's not a certainty that an IPO will happen, we are looking forward to it.

Stein Mart prepares for e-commerce launch

Stein Mart Inc. has produced strong sales results so far this year, but the Jacksonville-based fashion retailer is looking for even more sales growth as it launches its e-commerce business.

During the company's quarterly conference call last week, Chairman and CEO Jay Stein said the company will unveil the new online shopping site in the next few weeks.

"Not only will this venue allow us to reach new customers in areas that do not have a Stein Mart store, it will allow our snowbirds to shop year-round and provide a perfect platform for customers to view our merchandise, which certainly will increase store traffic," Stein said.

"It's a big deal. It's a big deal for all of American retail. We expect it to be a big deal for us as well," he said.

Stein Mart reported earnings of $3.4 million, or 8 cents a share, for the second quarter ended Aug. 3, up from adjusted earnings of $1 million, or 2 cents a share, a year earlier.

"Our second quarter was just great. Not only did we achieve a 6.4 percent comp sale increase, but our sales were a lot more profitable with a significant increase in the gross profit rate. The increased sales at higher margins and continued expense control just drove our higher earnings," Stein said.

Stein Mart had already reported two weeks earlier that comparable-store sales – sales at stores open for more than one year – rose 6.4 percent in the quarter. Comp sales are considered the key indicator of a retailer's performance.

"Stein Mart has vastly improved its merchandise over the last year. It is offering better brands at a higher price. The customer is responding well and willing to pay extra for the improved assortment," Avondale Partners analyst Mark Montagna said in a research note.

Stein Mart did have one cautionary note in its second-quarter report. After the company earlier this year changed auditors and had to restate earnings for 2010 and 2011 because of accounting issues, it disclosed that the Securities and Exchange Commission is investigating those matters. As usual in these situations, Stein Mart disclosed few details about the investigation.

"We're at the beginning of a process on this and other than to tell you what we've previously disclosed, and that's that we're fully cooperating with the SEC, there's really little more to say on this," Chief Financial Officer Gregory Kleffner said during the conference call.

Medtronic Inc. drops on sales miss

Medtronic Inc. was the biggest loser in the Standard & Poor's 500 index Tuesday after reporting adjusted earnings rose by 3 cents a share in the first quarter ended July 26 to 88 cents a share, with revenue rising 2 percent to $4.083 billion.

The earnings matched the average forecast of analysts, according to Thomson Financial, but the revenue was lower than the average forecast of $4.113 billion.

That sent Medtronic's stock down by $1.27 to $52.83 Tuesday. On a day that the S&P 500 broke a four-day losing streak with a 0.4 percent gain, Medtronic's 2.3 percent decline was the worst performance of all 500 stocks.

On the bright side, Medtronic had reached a five-year high of $55.98 earlier this month.

Minneapolis-based Medtronic's surgical technologies division, which is headquartered in Jacksonville, grew revenue by 11 percent to $361 million.

Sidhu has been through proxy fights before

Former Atlantic Coast Financial Corp. chairman and current board member Jay Sidhu, who recently saw three of his nominees added to the bank's board of directors, has been through proxy fights before, according to The Wall Street Journal.

After the three new directors were elected by shareholders at Atlantic Coast Financial's annual meeting 10 days ago, Sidhu was spotlighted in a Journal story last Monday that described a proxy fight he went through when he was CEO of Philadelphia-based Sovereign Bank.

Sidhu grew the bank into a major institution with a series of acquisitions but with its stock price lagging, he came under fire from one activist shareholder and was forced out in 2006, the Journal said.

Now Sidhu is on the other side. He led opposition to a proposed merger that was supported by Atlantic Coast Financial's management and most of its board. After shareholders rejected that deal in June, both CEO G. Thomas Frankland and Chairman John Linfante resigned.

Three other directors stepped aside, allowing the three nominees proposed by Sidhu to win election to the board without opposition. Although Sidhu deflected a question about his control of the board after the Aug. 16 shareholders meeting, directors with ties to Sidhu now have a 5-2 majority on the Atlantic Coast Financial board.

The company now is searching for a new CEO and for additional sources of capital. With the Journal story, the search is receiving national attention.

Dick's Wings owner expands management

Living up to its promise to expand its Jacksonville operation, American Restaurant Concepts Inc. last week announced the hiring of three new executives with Jacksonville ties.

The company, which franchises the Dick's Wings and Grill restaurant chain, recently moved its headquarters from Jacksonville to Lafayette, La., but it told the Daily Record two weeks ago that it intended to maintain and expand its Jacksonville office. All of its 17 restaurants are in Florida and Georgia.

The new hires are Director of Operations Mark Janasik, a former executive with a company that operates 15 Five Guys Burgers and Fries restaurants in North Florida; Director of Training and Quality Assurance Sandi Holley, who was a Dick's Wings franchisee in the Jacksonville area; and Director of Business Development Michael Small, who formerly worked for Bubba Burgers and Woody's Bar-B-Q.

The three will be working out of the Jacksonville office.

American Restaurant Concepts' 2012 annual report said the company had a total of only three employees.

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