I wonder if William Shakespeare had the economy and its effect on the food-distribution industry in mind when he wrote, "The jaws of darkness do devour it up: So quick bright things come to confusion."
Well, perhaps not, but it's beginning to seem as though the hope of late last year and of early this year that a better economy would buoy the fortunes of the industry during the second half has turned to dust.
You'll find at least three news articles in this week's SN that unfortunately suggest the industry is falling into the economic jaws of darkness, and that it is confused by growing competition.
Let's start with the fortunes of A&P. In an unusually frank assessment made in connection with that chain's issuance of quarterly numbers last week, A&P's Christian Haub said that results were "unsatisfactory" and that the economy presents "the most difficult operating environment in the past 20 years because of the harsh economic business climate and the intensified competition that has emerged."
As for the future, Christian asserted that "there is nothing positive to look at. We see no turnaround [in the economy]. In fact, everything seems to be going in the other direction. A few months ago, people were talking about a recovery in the first half or the second half. No one is talking about recovery now." (See Page 1.)
This is bad news for A&P, which will now have to shore up its position in the market. And, since A&P doesn't operate in a vacuum, it's also bad news for other food-distribution companies, such as the retailing branch of Fleming Cos.
Fleming too issued quarterly numbers last week. Although results were favorable, in the main, comparable-store sales declined 4.7%. That prompted Fleming's Mark Hansen to acknowledge that the retail side of that food-distribution company isn't doing well: "It's becoming clear that our retail operations are becoming less integral to our total performance and results and, frankly, our retail results in the quarter were somewhat disappointing." The slump in retail was attributed to competition, costs and meat-price deflation. (Page 4.)
That's prompting an evaluation of "strategic alternatives" concerning Fleming's price-impact formats, Food 4 Less and Rainbow Food. Many trade observers think Fleming will end up divesting or discontinuing those stores. If so, that would be in line with Mark's two-year-old strategy -- one that now seems particularly prescient -- under which Fleming divested nearly all its conventional stores.
It's instructive to observe that Fleming finds that its several limited-assortment Yes!Less stores are racking up impressive sales gains. That illustrates once again how difficult it is to establish a price image with any format other than a limited-assortment store that trumpets its point of distinction through the format itself.
Finally, the litany of bad news continued with Spartan Stores' issuance of quarterly numbers last week. Its comparable-store sales declined 8%, as did net sales. Twelve stores are to be closed. Predictably, that situation was attributed to competition and a weak economy. (Page 6.)
