Hepfinger, Weis in Abrupt Separation

SUNBURY, Pa. — Weis Markets last week announced the abrupt departure of its chief executive officer, David Hepfinger.

Hepfinger resigned from his position and the retailer’s board of directors “to pursue other interests,” the company said. Vice Chairman Jonathan Weis was installed as interim CEO, while Kurt Shertle, Weis’ executive vice president for sales and marketing, will report directly to Weis and take on additional responsibilities for store operations as the company reorganizes.

David Hepfinger

Hepfinger had served as Weis’ chief executive since 2009 when he succeeded 44-year veteran Norman Rich, and has led an effort to expand and modernize the 100-year-old, family-controlled chain, including extensive remodels and acquisitions, new emphasis on perishables and service, revamping technologies, and introducing new pricing and loyalty programs.

Despite those efforts, overall sales at Weis have declined for more than a year, including a steep 4.8% drop in comparable-store sales during the most recently reported second quarter. Hepfinger in a July 26 release said quarterly sales fell short as a result of cautious consumer spending and aggressive promotions in the comparable period.

Sources told SN Weis has also been beset by slower than expected sales in new stores located in the outskirts of Weis’ traditional markets, including several Philadelphia-area stores acquired a year ago from Genuardi’s. Shoppers in these markets have been slow to embrace Weis, they said.

“There have been some new stores — not relocations — and some remodeled and expanded stores that did not meet sales anywhere near Weis’ expectations,” Bob Gorland, a Harrisburg, Pa.-based site selection specialist with Matthew P. Casey & Associates, Clark, N.J., told SN. “But their store conditions and perishables have really improved.”

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Other sources said the separation indicated friction between Hepfinger and members of the Weis family, including its chairman, Robert F. Weis, and Jonathan Weis, his son. They are the son and grandson of company co-founder Harry Weis. The Weis family controls 65% of the company’s stock.

Jose Tamez, managing partner in the Denver office of executive recruiting firm Austin-Michael, said Weis’ outside hires have traditionally struggled to gain autonomy.

“There is something deeply rooted in the culture of that company where senior level management hires just don’t gain very much traction,” Tamez said. “It could be family related, to some degree, but these are not necessarily negative aspersions. Weis has been very successful in its own right, they are profitable, and you can’t really argue with their model.

“One thing they have done in the past, though, is that whenever they are seeking to attract new senior management, they always talk about how they want to bring in this person to make dramatic fundamental changes, and what invariably happens is the person is not allowed to make some of those changes — the very changes Weis had advertised the job being associated with,” he added.

Read more: Sales Slide at Weis in Q2

The company through a spokesman said it would not comment beyond a brief press release.

Hepfinger in March signed a five-year agreement with Weis, and documents filed by the retailer last week detail a lucrative separation agreement. Hepfinger will receive a payment of $2.25 million at the end of this year, and a $1.75 million payment at the end of 2014. He will also be paid at his current salary through the end of 2014 and receive company health coverage though the end of 2016. Hepfinger is also entitled to various incentive and retirement plans.

Weis operated 162 stores in five states by the end of its 2012 fiscal year, totaling sales of $2.7 billion. Sales improved by 7.4% and net income was up 75.6% to $82.5 million since the end of fiscal 2008 when Hepfinger took over as CEO.