We've just gone through a period during which several major companies have staged their shareholders' meetings and during which other key operators have made presentations to securities analysts.
A perusal of what these operators said in the recent forums -- as reported in this and other recent issues of SN -- suggests that the industry is now grappling with a dichotomy of strategies: Some companies seek growth through acquisition and aggressive new-store rollout programs, while others are refocusing on basics such as good customer service and refurbishment of existing store assets.
Of course many companies seek to do both, but it seems that one of these strategic thrusts will receive star billing while the other goes into hiatus for a while. Indeed, some securities analysts are acknowledging that Wall Street's favoring of companies that grow by far-flung acquisition -- as a means to insulate the core business from declining same-store sales -- may be wrong.
To support the change in thinking, they point to the much-beleaguered A&P, which is stronger at home and weaker in ancillary areas -- many of which were brought into the A&P fold by means of acquisition.
That situation is illustrated in the Page 1 news article in this issue on A&P's annual meeting. A&P Chairman James Wood told the meeting that the chain seeks to boost earnings to $2 per share, no mean feat given that it earned an anemic 10 cents a share last fiscal year and lost $4.96 per share the previous year. How can A&P achieve any significant earnings growth? One way may be through modest growth in selling space, but the real key may lie in a return to the basics of customer service. Christian Haub, A&P's president and chief operating officer, told SN's Senior Editor David Orgel after the meeting that "if [A&P] excels in customer service, it's going to be a big ingredient in bringing the company back to the position we deserve -- as a leader in the industry." There can't be much doubt that A&P can stand to do quite a bit of that.
Another company that's improving its fortunes by putting an eye on what customers want is Food Lion. That company has a tradition of huge expansion driven by adding stores. Certainly Food Lion is not backing away from augmenting store counts, but at the same time it's taking a new look at what customers really want. It's meeting expectations concerning net size and service departments by making sure the current store stock is suitably renovated. Megafoods is taking the path of shoring up what's already there a bit further. Megafoods, after a period of expansion by acquisition and format tinkering, now plans to take a breather and figure out how to get current stores up to good levels of profitability. Both Food Lion and Megafoods have said that adding food-service departments to stores without them is an important aspect of meeting customer expectations. Needless to say, ample examples can be found of companies that are committed to the other strategy of building the business through acquisition or substantial new-store activity.
Hannaford Bros., for instance, decided lately to leap beyond its core area of New England by acquiring a chain in the Southeast. In a different but growing new-store mode, Albertson's plans to increase its store base by about 44% in the next five years through organic growth. Some of that new-store activity will take Albertson's into new territory. Albertson's fortunes have been boosted for a while now by strong same-store sales and a move to total self-distribution.
And in the end, how well a chain is doing, and where it is doing well are the chief determinants in whether a chain should take another look at the basics or continue to build store counts.