News Watch 2007-02-19

SUPERVALU MUM ON NEW CONCEPT IN ST. LOUIS

ST. LOUIS — Plans for a mixed-use project under development here include a new concept supermarket from Supervalu to be known as City Market, a local developer told SN. Trace Shaughnessy, managing partner for developer Gilded Age here, said plans call for Supervalu to operate a 33,000-square-foot, upscale supermarket near downtown St. Louis in the Georgian Square development, scheduled to break ground shortly and open in summer 2008. Supervalu currently operates the Shop n' Save chain in St. Louis. Asked for comment last week, a Supervalu spokeswoman told SN “We have no project plans to announce in St. Louis.”

SEARS INVESTOR REVEALS 5% STAKE IN WINN-DIXIE

JACKSONVILLE, Fla. — Perry Capital, a New York hedge fund headed by a member of Sears Holdings' board of directors, has taken a 5% stake in Winn-Dixie Stores here, the investor said in a government filing last week. Perry is the first large shareholder to be revealed in Winn-Dixie since the company emerged from bankruptcy late last year and issued new stock. The fund is headed by Richard Perry, a major shareholder in retailer Sears Holdings named to that company's board of directors in 2005. Perry Capital “generally considers its investments long-term and seeks to develop close working relationships with key members of a company's management and operating team,” Sears said in a press statement announcing the board appointment. The firm's 2.7 million shares were worth more than $47 million based on the stock's price late last week.

ENERGY, OTHER COSTS HURT WEIS' BOTTOM LINE

SUNBURY, Pa. — Weis Markets last week said higher energy costs and other expenditures contributed to a decline in profits for the 13-week fourth quarter, which ended Dec. 30. The company said its net income for the period was down about 24%, to $14 million, compared with the 14-week period a year ago. Sales in fourth-quarter 2006 were down 4%, to $577.6 million, but were up 2.7% when adjusted for the extra week in 2005. Comparable-store sales rose 2.1%. For the full year, net income was down 11.7%, to $56 million, while sales rose 1%, to $2.24 billion. Adjusted for the extra week, 2006 sales rose 2.8%, and comps were up 2%. The decline in net income for the year was attributed to higher credit card fees, increased labor expenses for new stores and other factors, including a $1.2 million write-down on a closed store.

HOUCHENS TO SELL COMMONWEALTH TOBACCO UNIT

BOWLING GREEN, Ky. — Houchens Industries here has agreed to sell its Commonwealth Brands cigarette division to Britain's Imperial Tobacco for $1.9 billion. The deal requires government approval and the vote of Houchens' employee-owners, Jimmie Gipson, chairman, president and chief executive of Houchens, told SN in an interview. Houchens, a diversified company best known for operating supermarkets and convenience stores, purchased Commonwealth in 2001. The division, which manufactures discount cigarette brands, had sales of $348 million in fiscal 2006. Gipson declined comment on Houchens' specific plans for the proceeds of the sale, but said as an employee stock ownership plan company, “the shareholder is likely to benefit the most.”

COSTCO TO RAISE $2 BILLION IN NOTES OFFERING

ISSAQUAH, Wash. — Costco Wholesale here is seeking to raise $2 billion in five- and 10-year notes, bankers said in an offering last week. The retailer is expected to use the proceeds to refinance $300 million in debt maturing next month, as well as to fund stock repurchases. Fitch Ratings, New York, gave the notes an “AA-” rating and a stable outlook, noting that although the issue raises around $1.7 billion of debt to Costco's capital structure, the company's credit measures and business strategy remains strong.