Back to Basics for Bi-Lo, and for Its New CEO

JON SPRINGER

MAULDIN, S.C. — Michael Byars, who took over last week as the new president and chief executive officer of Bi-Lo, has a pretty good idea of what he's getting into. He grew up in Gaffney, S.C., about 45 miles from the retailer's headquarters here, and has a lengthy industry career spent mainly with Bi-Lo's competitors.

“Being very familiar with Bi-Lo, I'm looking forward to joining the company,” Byars told SN in an interview. “I grew up with Bi-Lo. And to come back to where you grew up and work with a great group of associates like Bi-Lo has, I'm very excited.”

But, say some observers, Byars is taking over Bi-Lo at a difficult moment in its history. The once-roaring economy in the Carolinas, where Bi-Lo operates most of its 216 stores, has been especially hard-hit as the banking, textile and tourism industries have suffered in the economic downturn. Competitors, including Wal-Mart, are gaining market share. And Bi-Lo's owner, the Texas-based private-equity firm Lone Star Funds, put the chain up for sale last year only to reverse course when the economy faltered and the field of potential buyers evaporated.

Since then, investment in the chain has dwindled, sources said, slowing the pace of new stores and redevelopments.

Byars, however, is upbeat. He said he expects Lone Star will provide appropriate support behind an effort to enhance the company's core strengths of knowing its customers and markets. Randall Onstead, Byars' immediate predecessor at Bi-Lo, has already begun work along those lines to promising results, Byars said.

“I have a high regard for Randall Onstead. He's done a phenomenal job of taking Bi-Lo back to its roots,” said Byars of Onstead, who is staying on as chairman. “Going back to roots means growing the Bi-Lo brand and enhancing what they've already done. Great low prices, great perishables and great quality products, and continuing with a strong image of great customer service. That will be our focus for this year.”

Byars most recently served four years as CEO of Minyard Food Stores, Dallas. Prior to his position with Minyard, he had a lengthy career with Delhaize Group — working in various capacities in the Food Lion chain for 19 years before being promoted to chief operating officer of Delhaize's Florida-based chain, Kash n' Karry, a position he held for six years.

His first job in the food retailing industry — as a bagger while in high school — was also with a Bi-Lo competitor, Ingles Markets.

From the perspective of a competitor, Byars said he considers Bi-Lo to have exceptional knowledge of its local markets and an excellent employee base. He described himself as an operations-focused leader anxious to capitalize further on those historic strengths.

“The biggest thing I can bring from my past is the understanding of getting the right products in the right stores at the right price — more or less, just merchandising to the neighborhoods we serve,” Byars said. “And even though we [at Bi-Lo] know our customers better than anyone, I think we can do better.”

The overarching challenge at Bi-Lo, observers add, will be to maintain market share at least until the credit markets loosen and Lone Star can once again find a buyer.

“I believe that they would entertain a buyer if they can find one but I think for now they are holding on and hoping the credit market will ease up and they find a buyer in a year or so,” Jeff Hershey, president of Jeff Hershey Consulting, told SN. Hershey said he worked with Bi-Lo on site selection until last year when he said he was told the company would not be expanding at least for a year or so.

“I wouldn't be very optimistic,” Hershey added. “Whenever you're standing still, you're not moving forward. You're really going backward.”

Burt P. Flickinger III, managing partner of Strategic Resource Group, New York, said he felt that constant turnover of executive ranks — Byars is Bi-Lo's third new CEO in two years — has made progress difficult, as has the souring economy in the Carolinas.

“Whenever one is competing with Wal-Mart, it is difficult enough, but changing CEOs that often is even more challenging,” Flickinger said. “Bi-Lo had the benefit of being in some of the fastest-growing markets in the country in terms of population growth and income growth, but with Wal-Mart site-saturating Bi-Lo's trade area with supercenters on one side, and Carolina's economy going down on the other, it's been difficult.”

Bi-Lo, along with the Bruno's chain, was acquired by Lone Star from Ahold in 2005. Brian Hotarek, a veteran Ahold financial executive, succeeded Ahold's Dean Cohagan as Bi-Lo's CEO in 2007. Under Hotarek, Bi-Lo dropped its Alabama-based sister chain, Bruno's, which filed for Chapter 11 bankruptcy protection last month.

Onstead joined Bi-Lo's board of directors last summer and served as interim CEO after Hotarek retired late last year. He told SN late last year that Bi-Lo was not for sale.