HARRIS-TEETER OFFERS MORE FOR WINN-DIXIE STORES

Mark Hamstra

MATTHEWS, N.C. -- If Harris-Teeter here had designs on expanding throughout the Southeast, Winn-Dixie Stores might have been able to make its creditors very happy.

Winn-Dixie said Harris-Teeter, a division of Ruddick Corp., Charlotte, N.C., has bid $16.75 million for nine Winn-Dixie locations in North Carolina, or an average of about $1.86 million per store. Bids for the remaining 70 stores that Winn-Dixie is seeking to sell at an auction this week averaged only about $313,000 per store.

Analysts said Harris-Teeter's upscale positioning and regional strength may justify the high price it is paying to bolster its presence in its core markets, however.

"The price may be high if you view it in the context of the kind of business Winn-Dixie was doing, but Harris-Teeter's business is not constrained by or even correlated with the business Winn-Dixie did at a location," said Russell Jones, retail director at New York-based turnaround firm Alix Partners. "Part of it is that Harris-Teeter can do better at those locations than Winn-Dixie was ever going to do, given the competitive landscape, and part of it is that the Harris-Teeter model can tolerate a little more cost for capital. They are willing to make a little bigger investment in building a store, so they are going to be willing to pay a little more."

A spokesman for Harris-Teeter declined to comment on the bids.

Jones said Winn-Dixie had some good locations, although he could not comment specifically on the sites Harris-Teeter had bid on. Those stores included four in the Greensboro-High Point market, three in the Charlotte area and two in the Raleigh-Durham market.

"Winn-Dixie's problems were not about the locations, they were about the market position they had," Jones said, noting that Winn-Dixie probably "suffered the most" from Wal-Mart's expansion in the Southeast. "They had the least in terms of an alternate vision of why people would want to shop there."

Neil Stern, a senior partner at McMillan Doolittle, Chicago, agreed that some Winn-Dixie sites could be suitable for Harris-Teeter.

"Harris-Teeter in particular looks for upscale markets," he said. "There's great value in a very few of those Winn-Dixie stores."

Of the nine stores Harris-Teeter bid on, the most expensive was a Winn-Dixie Marketplace location at the High Point Mall, for which Harris-Teeter offered $5.22 million. It also offered about $3.5 million each for a Marketplace store in Raleigh and another at the Weddington Corners Shopping Center in Matthews. It offered $2.7 million for a Marketplace store in Huntersville, which, like Matthews, is a Charlotte suburb.

The 79 stores for which Winn-Dixie received bids are among the 326 that the company said it would dispose of as part of its bankruptcy reorganization. The company said it would seek to shutter the remaining locations and market them to bidders other than supermarket operators.

"My opinion is that we could lose all of Winn-Dixie's locations and not be at a loss for places to buy groceries," Jones said.

Other bidders for the 70 Winn-Dixie stores not bid on by Harris-Teeter include Supervalu, Minneapolis, and Bi-Lo, Mauldin, S.C.