Raley's Cuts Top Staffers

ELLIOT ZWIEBACH

WEST SACRAMENTO, Calif. — In an effort to reduce costs, Raley's here said it is eliminating five top executive positions, further fueling speculation about the future of the company.

Michael Teel, president and chief executive officer, told SN the cutbacks “have nothing to do with performance issues — it's simply that we can't afford that kind of structure in today's competitive marketplace.”

Industry sources said the move to cut the executive committee staff in half reflects the competitive pressures with which Raley's is dealing.

Bob Reynolds, principal at Reynolds Economics, Moraga, Calif., said the cutbacks indicate Raley's “is hunkering down and getting back to basics.”

Reynolds said he believes Raley's sales have been under pressure because of new competition at the high and low ends of the market and the revitalization of Safeway.

George Whalin, principal at Retail Management Consultants, Carlsbad, Calif., said the cutbacks could be a prelude to a restructuring of Raley's, “or even a sale, which is always a possibility, though it's more likely the company is simply looking for ways to make its operations more efficient and more productive.”

In addition, one observer said, the decision to reduce the executive staff reflects “a desire by Teel to surround himself with people he has worked with before rather than those he inherited from his predecessor [Bill Coyne].”

Despite general industry opinion that Joyce Raley Teel, co-chair of the chain and the daughter of its founder, does not want to sell the company, “if Michael Teel can turn things around and improve the operation, Raley's would have to consider selling if it got a reasonable offer,” the source added.

Teel told SN the speculation “is not unexpected, but this is simply a competitive move because the type of structure companies have enjoyed over the last 15 years is no longer sustainable.

“While these moves look drastic — and in some regards they are — they will enable us to be more competitive in the marketplace. We're doing well now, with store hours up as customer counts increase.”

Asked whether Raley's might be for sale, Teel replied, “We are absolutely not for sale. I wouldn't have come back if that was the case.”

The five people affected are Dave Clark, chief operating officer and, before Teel's hiring, interim president, and Joan Miszak, senior vice president, organizational effectiveness, who will stay on till the end of Raley's fiscal year on June 30; Michelle Cervantez, chief marketing officer, and Todd McHenry, chief legal counsel, who will remain until the end of this month; and Joel Barton, senior vice president, sales and merchandising, whose job was eliminated this month.

In an internal memo distributed to Raley's employees — a copy of which was obtained by SN — Teel listed three reasons for the cuts:

“While we have seen some improved business performance over the past two periods, our competition is responding to the investments we have made in pricing, and we must remain on the offensive,” Teel said in the memo.

Teel told SN he approved the cuts on the recommendation of Clark and Miszak, who were part of a four-member committee asked to find ways to lower expenses.

Raley's 134 stores have estimated sales of $3.4 billion.

In other changes:

According to Teel, Raley's has been cutting store costs over the last 18 months, “so now we had to walk the walk at the administrative level.”