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The retail newsmakers: Progressive Grocer picks the merchants who'll make the headlines in 2005.

In the kind of market grocers have been dealing with over the past couple of years, some players would argue that no news is good news. But the reality is that the grocery business is more volatile than ever, and big stories will mark 2005. Mergers will alter the landscape, underperforming stores will be closed by the hundreds, and smart operators will open new windows of opportunity for food merchandising through store innovation.

It pays to keep in mind who the movers and shakers are likely to be, as well as who's liable to get moved and shaken. PROGRESSIVE GROCER has assembled a roster of both on these pages, broken into three categories:

* The Architects: The big guns, whether by dint of size or influence, that have set the standards for retailing and whose moves will have ripple effects across the field.

* The Achievers: Food retailers that wield power in their corners of the industry, that broke new ground in 2004, and that are likely to make news again in 2005.

* The Strivers: Those companies facing acute challenges, among them toiling to recover lost ground, emerge from mediocrity, or just hang on to fight another day. This year holds the potential of making or breaking some of these operators.

THE ARCHITECTS

Aldi

If Aldi were an automobile, this German import would the original VW Beetle: small, cheap, highly efficient, deceptively simple, and revolutionary.

Based in Essen, Germany, Aldi introduced the limited-assortment concept to this country 1976, when its first U.S. stores opened in Southeastern Iowa. Today Aldi, Inc. operates more than 700 stores in 26 states, primarily from Kansas to the East Coast.

The stores average around 16,000 square feet but can pack a wallop. Domestic operators have adopted the format as a way to loosen Wal-Mart's grip on discount consumer dollars in many markets. Meanwhile some analysts see Aldi itself as a gradually but steadily growing force, as long as shoppers continue to seek bargains. The company currently operates more than 700 stores in 26 states, and has been aggressively seeking new sites for the past few years.

Costco Wholesale Corp

Costco Wholesale Corp. is the warehouse club for foodies.

Its power as a consistently successful purveyor of food--along with the crazy quilt of other products that its club stores merchandise--has attracted a devoted base of 43 million card-holding members.

Costco's position as the price-value leader helps the 449-unit chain steal share from other channels, including supermarkets, and will keep it on track to meet analysts' expectations of earnings growth for the current fiscal year. Strong showings from fresh foods, groceries, and sundries has already helped raise sales by 10 percent to $11.34 billion for the first quarter of fiscal 2005. Comp sales increased 7 percent.

Fiesta Mart, Inc.

Ethnic marketing is all the rage now, but Fiesta Mart was one of the prime inventors of the movement, perfecting it well before it became fashionable.

Since its founding in 1972, the 50-store Houston-based company, which also operates stores in the Dallas/Fort Worth and Austin areas, along with 16 Beverage Mart liquor stores, has focused on supplying ethnic as well as conventional groceries to its diverse customer base. Fiesta Mart's target shoppers now include not only Mexican-Americans, as reflected in the retailer's cheerily Spanglish name, but also the growing contingent of Asian-Americans in the Lone Star State.

Last year Fiesta Mart was purchased by Houston-based wholesaler Grocer Supply Co., in a deal that could give the retailer the infusion of

capital it will certainly need in 2005 to withstand Wal-Mart and other competitors that will be jumping on the ethnic marketing bandwagon.

H-E-B Grocery Co

H-E-B Grocery Co. shines as the quintessential local operator that's hard to beat. One hundred years after beginning as a small corner grocer in Kerrville, Texas, and some 300 stores later, the San Antonio-based chain is one of the most well-rounded stars in food retailing.

The family-held company has combined the best of two worlds: rock-solid footing in its communities in the Lone Star State, thanks to many philanthropic initiatives; and a reputation among its grocery peers for merchandising excellence, tailored local assortments, a vibrant private label program, savvy use of technology, and innovative formats.

H-E-B accomplishes all of this in a state where Wal-Mart operates more supercenters-roughly 180--than anywhere else.

Most recently, the chain debuted a new large-format prototype, H-E-B Plus, which devotes significant selling space to general merchandise such as toys, housewares, and home entertainment items. The first two 109,000 square footers opened last year in San Juan and Waco, Texas, with a third slated to open in Austin this year.

IGA

Founded in 1926 by J. Frank Grimes, IGA has developed a commanding presence in the supermarket industry, proving that in a retailing world dominated by big guns, there's still safety and power in numbers.

With its members operating more than 4,000 stores worldwide, the Chicago-based global alliance generates over $21 billion in annual retail sales.

Under the longtime leadership of chairman Dr. Tom Haggai, IGA has survived enormous challenges over the past five years, most notably the bankruptcy of Fleming, which had supplied nearly 40 percent of IGA's U.S.-based stores. The world's largest voluntary supermarket network now faces the ongoing challenge of developing or strengthening its relations with other domestic wholesalers.

On IGA's agenda for 2005: developing a variety of store formats; an assessment program to measure standards of operations, sanitation, safety, and branding efforts; and continued progress through the IGA Institute, a proprietary center for learning and research.

Kroger Co

The reigning king of the pure-play grocery, Cincinnati-based Kroger wrote the book on productive and efficient growth through acquisitions. Fewer than 15 percent of sales come from its eponymous banner. The chain's 3,700-store line-up, spanning 32 states, includes multibanner supermarkets, supercenters, c-stores, jewelry stores, fuel centers, and 42 processing plants.

Kroger's continued strength boils down to the same characteristics of a winning football franchise: talented coaches, a solid offense, skillful blocking and tackling, and good teamwork. Kroger earns high marks for a decentralized structure dependent on strong regional divisions, led largely by executives well versed in both the universal retail playbook and local field conditions.

The bigger discounts it has been rolling out of late signify that Kroger clearly has no intention of cutting the Rollback Man any slack. Of course, Kroger is also aimed at winning back customers after last winter's protracted grocery strike and lockout in Southern California, a market where the chain still has its work cut out for it.

Publix Super Markets

Publix is the epitome of the regional grocer that the big publicly owned companies would love to buy. So far the privately held retailer, based in Lakeland, Fla., has doggedly maintained its independence while edging its influence northward and constantly experimenting with new ideas in merchandising and operations.

Customer service is the attribute most often associated with Publix, but the chain also gets kudos for achieving consistent same-store sales gains, no small feat in today's competitive climate. Employees own nearly a third of the company, which analysts say helps make every store clerk an ambassador.

While hurricane damage in the Southeast dampened profits, the chain, with 842 stores in the Southeast, still netted a double-digit sales gain for the first nine months of 2004, at $13.8 billion compared with $12.4 billion, or a 10.8 percent jump.

During those nine months Publix also plowed cash into its store base, to the tune of $325 million, to open 28 new supermarkets and remodel or expand 55 units.

ShopRite/Wakefern

ShopRite has come to define cooperative grocery retailing. From a struggling cooperative with just seven members--all owners of their own stores--it has grown into the largest retailer-owned coop in the United States.

The mighty co-op today comprises 43 member-owners of individually owned and operated supermarkets under the ShopRite banner, 50 percent of which include pharmacies. Wakefern, ShopRite's merchandising and distribution arm, supplies 190 ShopRites in New Jersey, New York, Connecticut, Pennsylvania, and Delaware. With their roots in mom-and-pop stores, most of ShopRite's locations remain family-owned, with many run by second, third, and fourth generations. Together with a few dozen corporate-run units, the co-op is known for legendarily high per-square-foot sales ratios.

Its unwavering EDLP price strategy, however, is something of a blessing and a curse simultaneously, enabling the co-op to retain its market share in the country's most competitive regions while keeping many highly desirable higher-income consumers at bay.

Some observers infer that a few of ShopRite's members may be weakening due to age or competitive considerations, but the co-op continues to market aggressively and merchandise effectively. Word is that Wakefern is also gearing up to expand the SaveRite hard-discount format this year.

Trader Joe's Co., Inc.

There's nobody else in the market quite like Trader Joe's.

That's not an easy claim to make, but in this specialty operator's case, it's a fair one. Trader Joe's highly unusual combination of decent prices, a high quotient of creative private label items, and gourmet, organic, and natural foods has granted the quirky operator cultlike status. The formula also is especially effective at insulating the 210-store chain from traditional grocery competition.

Conceived in the late 1960s, Trader Joe's units are a real hybrid--highbrow/Earth Shoe limited-assortment stores. They typically measure under 10,000 square feet and carry only 2,000 to 2,500 items, most of which are store-branded. The company's stores crisscross the country, and the chain is likely to open more of them in 2005.

Based in Monrovia, Calif., Trader Joe's Co., Inc. is owned by German billionaire brothers Karl and Theo Albrecht, who also own the Aldi Group.

Wal-Mart Stores

When Wal-Mart sneezes, supermarket operators catch cold, and consumer goods makers rush in with tissues. Indeed, the Bentonville giant could be considered the premier architect of modern mass retailing, let alone the lead protagonist of the grocery business.

Wal-Mart took a few lumps in 2004, thanks to an avalanche of negative press and an accumulating pile of lawsuits attacking its treatment of employees. Then came the astounding news of the chain's apparent merchandising misstep, when it stumbled on Black Friday by seemingly reading the markdown hunger of its customer base incorrectly.

But a chink in the armor isn't about to slow this leviathan down. Wal-Mart is still boosting its store capacity by around 8 percent annually, and it's barely scratched the surface in the Northeast and West Coast. Rest assured: The world's biggest retailer--and largest U.S. supermarket chain--with annual sales now approaching $300 billion, will continue to replace older discount stores with supercenters by the hundreds and build scores of new units, self-cannibalization be damned.

Wegmans Food Markets

The first name in upscale food retailing, Rochester, N.Y.-based Wegmans Food Markets is routinely credited for running 67 of the best--and highest-volume--supermarkets in the country.

Wegmans is the format other retailers scramble to steal ideas from, especially when it comes to fresh food presentation. It was one of the first proponents of the fresh food power alley and is internationally renowned as a talented merchandiser.

But the chain is much more than that. It's also widely recognized for its innovation in logistics and technology applications, as well as for its relentless competitiveness without having to stoop to price warring. In short, Wegmans resides in a league of its own and continues to perfect its game.

With some $3.3 billion in sales last year, the family-held chain, presided over by the enigmatic Danny Wegman, certainly knows how to keep the competition on their toes, in New York, Pennsylvania, New Jersey, and now Virginia and Maryland. The chain opens its first location in Fairfax, Va. in a few weeks, followed by another debut, in Hunt Valley, Md., this June.

Whole Foods Market

Is Whole Foods the Wal-Mart of health and wellness?

Okay, maybe we're comparing apples to organic oranges. But if it didn't invent the health food supermarket, Whole Foods has certainly made it work, taking it on the road as a steamrolling competitive force that in the past couple of years has made just about every supermarket operator of note sit up, take notice, and start carrying more health food.

Whole Foods is on point in a movement toward healthier living that's not only helping to change mass food retailing, but manufacturing, as well.

It embodies financial health, too. The chain, with more than 160 units in North America and the United Kingdom, had sales growth of 23 percent, to $3.9 billion, in fiscal 2004, and record same-store sales of almost 15 percent on top of that. Even eight-year-old stores in the chain are producing double-digit comps.

While it'll be hard to top that performance this year, expect aggressive growth nonetheless. Plans include 15 to 18 new stores, and sales growth of 15 to 20 percent.

THE ACHIEVERS

Albertsons, Inc.

While it's used to being counted among the top three grocers in the United States, Albertsons is continually searching for ways to be No. 1.

The trouble is, in the ultra-competitive climate the big Boise, Idaho-based chain currently faces, it's having to work harder than ever just to hold its place.

Albertsons has just about fully recovered from 2003's strike/lockout in Southern California. Now, with more than 2,500 stores in 37 states under nine banners, Albertsons has a lot to lose and a lot to gain, depending on how successful it is with initiatives such as a mandate to drive costs out and an ongoing strategy to diversify its asset portfolio via such acquisitions as last year's Shaw's and Bristol Farms buys, as well as launching a subsidiary for its new Super Saver price-impact banner, and a plan to reinvest heavily in pricing and promotions to grow market share.

Giant Eagle, Inc.

Giant Eagle is the kind of regional operator that doesn't duck a challenge.

Intensified competition in its core territories prompted the chain to spring into action, launching a price-impact ValuTime line while at the same time embarking on an aggressive EDLP consumer campaign to appeal to more value-oriented shoppers.

That's emblematic of the tenacity of the privately held 221-store chain. Family-operated Giant Eagle has built a solid business by focusing on customer loyalty, value, service, and staying light on its feet.

The $5.2 billion chain's new Ohio prototype is earning accolades for a full complement of convenience-oriented products and services available in an attractive, efficient, and functional floor plan.

Harris Teeter

Harris Teeter more than holds its own in the contentious Southeastern region, with 140 gorgeous upscale supermarkets, mostly in North Carolina, but also in five other states.

When it comes to private label, the Matthews, N.C.-based chain is on the verge of being an overachiever. In 2004, sales gains from its private label items, which encompass both fresh and dry categories, continued to outpace the company average.

Sales overall were up 5.8 percent in fiscal 2004, due in part to strong comparable-store sales--in spite of a strategic decision the chain has made to, in essence, oversaturate its core markets with close-proximity units in a bid to expand market share.

Hy-Vee, Inc.

West Des Moines, Iowa-based Hy-Vee has come a long way since its humble beginnings in the 1930s. Today the Midwestern retailer is one of the largest privately owned chains in the country, operating 220 stores, including 28 Drug Town pharmacies, in seven states.

Hy-Vee succeeds, and will most likely continue to do so, by customizing stores to individual communities, as well as fostering a culture of autonomy in which store managers make buying decisions and are empowered to capitalize on local opportunities.

Marsh Supermarkets

Regional star Marsh Supermarkets never stops innovating--and given the competitive and economic pressure roiling its core markets, that's a very good thing.

The Indianapolis-based publicly held chain rolled out two major new food formats during its fiscal 2004: the "Lifestyle" store, a unique design with products grouped to enhance menu planning, and the Arthur's Fresh Market store, a 21,000-square-foot strategic weapon aimed at small and/or urban markets big-box competitors are unlikely to penetrate.

Both were well received and fit well into Marsh's mandate, under longtime leader Don Marsh, to operate stores tailored to specific markets.

The chain's home territory has been getting tougher, however, and Marsh's comps and profits have suffered. In response it has added sharper pricing and increased attention to private label to its playbook.

The new format rollout will spearhead Marsh's strategy in 2005: Watch for another Arthur's and two more "Lifestyle" units, with one of the latter most likely to lead the chain's introduction to Chicago.

Price Chopper

For nearly eight decades Schenectady, N.Y.-based Price Chopper has been a solid performer in one of the country's most competitive markets. Led by c.e.o, and president Nell Golub, the 106-plus store, ESOP-owned chain operates in six Northeast states.

To the west it does battle with world-class food merchant Wegmans, and to the east it goes head to head with Hannaford's community-focused supermarkets and food-and-drug combination stores, owned by Delhaize.

Despite such stiff competition, the Golub family and Price Chopper's management team continue to foster success by operating clean, well-merchandised stores, and offering customers exceptional perishables departments, such as best-in-class seafood and extensive floral shops.

The company's "Best in Fresh & Low Prices" marketing strategy is supported by a consistent advertising message, with service delivered by well-trained associates, many of whom attend the company's own Price Chopper College so they can learn to do their jobs even better.

Raley's

Staying in sync with its customers is a key reason for the success of Raley's, the West Sacramento, Calif.-based upscale chain.

As one of the Golden State's largest private companies, Raley's operates 135 stores under its namesake banner as well as subsidiaries Bel Air Markets, Nob Hill Foods, and Food Source. Its territory stretches throughout Northern California and into Nevada and New Mexico.

Named among the nation's top grocery stores three times in a row by Consumer Reports, Raley's scores the highest marks for meat, produce, variety, clean stores, and friendly service.

Not unlike other California-based grocery retailers, however, last year Raley's was forced to deal with some very complex labor issues; at the same time the competitive landscape shifted under the weight of Wal-Mart, which opened three supercenters in California this year, including one in Stockton.

Food Lion, LLC

The largest U.S. banner of Brussels, Belgium-based Delhaize Group, Food Lion knows a thing or two about food retailing, and has been teaching itself a few things more.

Having steadily increased its presence in the Southeast with a formula of no-frills supermarkets and low prices, Food Lion started to change after Delhaize began cross-pollinating the chain with more recent acquisition Hannaford Bros. of Scarborough, Maine.

Over the past two years Food Lion revamped its format and reintroduced itself to two North Carolina markets through "market renewal" projects involving hundreds of store renovations. In early 2004 it also unveiled Bloom, an experimental concept focused on finding innovative ways to enhance the shopping experience by making it more intuitive and convenient.

Food Lion has now embarked on a third market renewal, in Greensboro, N.C., and Anicetti has hinted that more renewals are in the offing.

Safeway, Inc.

Comprising more than 1,800 stores in North America, Pleasanton, Calif.-based Safeway has gone far in defining the food shopping experience for millions in the West, Midwest, and Mid-Atlantic, as well as Western Canada, through such key differentiators as a strong emphasis on the consumer value equation and an extensive private label program, including Safeway Select products.

The huge conventional supermarket operator has scrambled to keep pace with the times--for example, by taking a farsighted majority ownership stake in e-taller GroceryWorks.com, as well as a 49 percent stake in Casa Ley, a retailer in Western Mexico.

The road has not been smooth lately for Safeway, however. Its acquisition of Dominick's has done little to ease the Chicago-area chain's woes. Labor clashes, especially last year's infamous strike/lockout in Southern California that hurt its Vons stores, have taken a major bite out of profits, and Vons is still in the throes of a "gradual strike recovery." Also last year, Safeway chairman, president, and c.e.o. Steve Burd was forced to face down a bitter shareholder revolt.

Safeway will remain a force to be reckoned with in 2005, planning major brand-building and marketing investments and a continued expansion of private label. It plans about $1.4 billion in cash capital expenditures, to open 30 to 35 new stores and remodel 275 to 285.

Schnuck Markets, Inc.

Described by observers as one of the last of the great central U.S. retailers that provide great quality and great service at reasonable prices, St. Louis-based Schnucks Markets is still in growth mode.

On the heels of opening its first ground-up store in the area last summer in Collierville, Tenn., Schnucks began the second phase of its Memphis expansion, which includes three new stores.

Schnucks now runs 102 stores (including five Logli stores) and 95 pharmacies in Missouri, Illinois, Indiana, Wisconsin, Tennessee, and Mississippi.

Increasingly heavy competition, rising labor costs, and a sluggish economy in its core markets have forced the grocer to make some tough decisions in recent years to remain competitive. But Schnucks remains undaunted and will forge ahead with new-store development projects, lower prices, quality perishables, and responsive service.

Shaw's Supermarkets, Inc.

Last year was a busy one for 204-store West Bridgewater, Mass.-based Shaw's. Most notable was Sainsbury's deal to sell Shaw's to Boise, Idaho-based Albertsons, Inc. for almost $2.5 billion, a surprise transaction that extended Albertsons' reach into New England.

The acquisition once again thrust Shaw's into the spotlight, with a controversial corporate decision to eliminate some 300 store-level jobs. However, Shaw's recovered quickly to mount a direct assault on Ahold's Stop & Shop division, with efforts to attract new customers and regain market share by opening several new stores and earmarking $470 million for continued store development projects.

Shaw's also opened the doors of a new flagship store, at the Prudential Center in Boston, that doubled the selling square footage of the former Star Market location it replaced. Company officials viewed the new unit as an important store for Shaw's in a densely populated, prominent location in the heart of the city.

Stater Bros. Markets

Last year's Southern California labor strike/lockout was a home run for Stater Bros. Markets. The Colton, Calif.-based chain enjoyed an increase in traffic as shoppers defected from Vons, Ralphs and Albertsons.

The windfall was extraordinary, jacking fiscal 2004 sales up 34.5 percent to $3.7 billion, compared with the year before, and increasing comps 30.3 percent.

Stater Bros. is working hard to retain those consumers through excellent service, top quality, and low prices at its 159 stores. Founded in 1936 as a family operation, it still pulls off a hometown feel in Southern California, due largely to the leadership of c.e.o. Jack Brown, and its celebrated "family" of employees.

The retailer sounds confident in its ability to keep business booming: In a $200 million project, it's building new general offices and a 2.4 million-square-foot distribution center on 160 acres in San Bernardino. Additionally, Stater Bros. has three stores on the drawing board for 2005 and a goal of 167 units by the end of 2006.

Ukrop's Super Markets

The name Ukrop's is synonymous with good fresh food, and not just in its home market of Richmond, Va. The Ukrop family has worked hard over the past 70 years to craft a state-of-the-art regional chain that offers unmatched service and product quality.

Ukrop's, which currently operates 29 stores (including a Joe's Market), mostly on its home turf, but also now in neighboring cities Williamsburg and Fredericksburg, has a national reputation for merchandising excellence, with touches like a source-verified and traceable signature meat program. It was a pioneer in fresh home meal solutions, with a chilled prepared foods program up and running in 1989, and is renowned for its in-store bakeries.

Its most powerful asset is probably the devotion it engenders among Richmond grocery shoppers. But Ukrop's is finally stepping outside that comfort zone to test the waters in Roanoke, Va. in the fall of 2005.

Weis Markets

After years of dominating its core Central Pennsylvania market, an air of complacency settled on Weis Markets, and it was forced to play a wicked game of catch-up throughout the 1990s after its leading competitor, Ahold's Giant Food Stores in Carlisle, Pa.

Insult was added to injury in 1999, when a dissident group of prime shareholders sought to force the chain into a merger or acquisition. Weis ultimately resolved its distracting family feud with some financial ministrations. But the Sunbury, Pa.-based retailer has since staged a quiet comeback with an aggressive new store and remodeling campaign to upgrade and modernize its store base with perishables-intensive offerings. It currently operates 158 stores in six states, as well as SuperPetz, a 33-store pet supply superstore chain in 11 states.

It's also seen a lot of talented senior-level retail merchandising executives come and go, but Weis continues to press on. Its third quarter delivered the 13th consecutive rise in same-store sales, which were largely influenced by continuing strong performance from perishables.

THE STRIVERS

Ahold

It's been a year of self-described transition for global retailer Ahold NV, and the transitioning is far from over. Still trying to regain its footing after a major accounting scandal that erupted almost two years ago, Ahold's losses widened in its most recently reported fiscal 2004 third quarter, largely attributable to onetime charges.

The company nevertheless believes it has made good progress on its "Road to Recovery," particularly in the third quarter. And, more important, Ahold anticipates posting improved comp sales and earnings next year.

But the retailer still has a lot of work to do, including settling the currently chaotic climate engendered by the ongoing operational integration of its big subsidiaries Stop & Shop in Quincy, Mass. and Landover, Md.-based Giant Food.

Next up is the sale of its Bi-Lo and Bruno's divisions, most likely to an investment group. At press-time the deal was expected to close by the end of 2004.

The Great Atlantic and Pacific Tea Co.

The road to recovery has been a long one for A&P, and the $10.8 billion retailer still has many miles to cover.

A&P's Montvale, N.J.-based corporate offices, led by chairman, president, and c.e.o. Christian Haub, have been collapsing management and operating structures at the once-mighty supermarket operator, trying to pare down to a leaner and meaner company that's more in tune with the market.

It's still among the nation's larger grocers, with 649 stores in 10 states, the District of Columbia, and the Canadian province of Ontario under 11 banners. But performance swings wildly from division to division, with some making good progress and others struggling to hold on against formidable, more efficient, and more market-savvy foes. While A&P Canada has turned the corner to profitability, Farmer Jack in Detroit is still a work in progress, with heavy emphasis on the word "work." Meanwhile A&P's discount Food Basics format is a bright spot, and the company is perusing its ranks for dozens of conversion opportunities.

Overall the company is losing money, and gross margins are in a stubborn state of decline that's not likely to change soon. A&P's biggest objective in 2005 will be to reach and then exceed the break-even point.

Kmart Corp.

The main topic of conversation these days regarding Kmart might be the ramifications of its merger with Sears, but the real story is that the Troy, Mich.-based discounter, with about 1,500 stores in 49 states, as well as an online arm, kmart.com, is fighting to regain share in a discount market where it now ranks third, behind Wal-Mart and Target.

Since emerging from Chapter 11 bankruptcy protection in May 2003, Kmart has improved sourcing, logistics, pricing, inventory management, and in-store presentation, leading to the posting of its first profitable quarters in three years, beginning last March. Shares of the retailer have skyrocketed, rising almost 600 percent. Observers credit this phenomenal turnaround to Kmart chairman Edward Lampert, under whose leadership the once-broke company now has about $2.6 billion in cash.

However, speculation is whirling around Kmart regarding whether the Sears deal signals a retreat from the grocery business it has pursued in about 60 supercenters. The merger's success, according to analysts, will come down to whether executives can reduce costs while still making needed investments to upgrade stores.

Pathmark Stores, Inc.

The past two decades have been a rough ride for Carteret, N.J.-based Pathmark Stores, starting with an unfortunate greenmail attempt, a leveraged buyout by Merrill Lynch shortly thereafter, and later, an acquisition deal with Ahold that was quashed by the Federal Trade Commission.

After operating briefly under Chapter 11 in mid-2000, the chain emerged as a public company with a $1 billion lighter debt load. It appeared poised for a rebound, but its fortunes turned south again, and the bumpy journey continues.

Trailing a series of widening quarterly losses, the board last month admitted retaining a financial adviser to explore a sale. Pathmark's most tangible assets--142 food/GM combo stores with loyal associates--may be nice fit for a savvy suitor, even given Pathmark's current weakened condition in one of the country's most fearsome markets.

The rumor mill recently chumed up Brussels, Belgium-based Delhaize as a prospective buyer. With a projected price tag of roughly $900 million, however, Pathmark is likely to be divested piecemeal in deals with more than one buyer, observers speculate.

Penn Traffic Co.

Penn Traffic Co. has a lot of striving to do.

The Syracuse, N.Y.-based company, with 109 supermarkets under the BiLo, P&C Foods, and Quality Markets banners in New York, Pennsylvania, New Hampshire, and Vermont, has seen more than its share of troubles recently, chiefly Chapter 11 bankruptcy in May 2003 (its second such filing in four years), and the sale or closure of its Big Bear and Big Bear Plus stores in Ohio and West Virginia.

However, Penn Traffic isn't down for the count yet. Still under Chapter 11, it has repeatedly postponed a reorganization plan hearing while it tries to cement a sale\leaseback deal that's supposed to shave off substantial debt. The company has been working on a major overhaul of stores (at press-time nine had been remodeled, with five in progress), and just last month Penn Traffic bought two former Peter's Groceries stores in Syracuse and reopened them under the P&C banner.

Target Stores

Target Stores is a super merchandiser, but SuperTargets continue to do an under-whelming job of food merchandising.

The 47-state discounter, which runs 1,313 conventional units and 136 SuperTargets, initiated a supercenter strategy as a way to wring more growth from its flagship Target banner. But the rhythm of its grocery formula is failing to produce the same buzz, even with its most loyal customers, that its nonfood strategy does.

But it looks like the retailer's food/GM combo markets will continue to be key. Target opened a record 46 stores during its third quarter, including 10 new SuperTargets. Six more are on tap for 2005. Company officials envision the supercenter format accounting for about 30 percent of its new retail square footage, going forward. Target's biggest challenge there, say its own corporate executives, is overcoming the perception that its food merchandising strategy belies its competitive prices, and they plan to sharpen up its game, to get the message out.

Wild Oats Markets, Inc.

What happens when health food chains get sick?

Well, Wild Oats has tried some pretty conventional turnaround prescriptions. The Boulder, Colo.-based health food supermarket operator, a distant second to segment leader Whole Foods, is in the throes of reorganization therapy under the care of c.e.o. Perry Odak. The chain is building new stores, upgrading existing ones, and closing unprofitable locations.

What it has going for it is the momentum still gathering behind the organic grocery segment, in which Wild Oats has a hefty stake, with 108 stores under several banners in 24 U.S. states and the Canadian province of British Columbia.

The company is also experimenting with remedies such as hawking its private label with online retailer Peapod and testing ministores in Stop & Shop units.

Winn-Dixie Stores, Inc.

Southeastern grocer Winn-Dixie has been stumbling, but it appeared to have made the right choice by hiring noted "people person" and former Albertsons exec Peter Lynch as its new president and c.e.o.

Observers applauded the appointment. Still, the move might have come too late to bring about a successful turnaround for the Jacksonville, Fla.-based chain, which has been shuttering stores and losing market share.

Early last year the company, which operates around 1,000 stores in 12 states and the Bahamas, launched major strategic initiatives such as an expense-reduction plan and a core market analysis and rationalization review, aimed at doing all the right things: grow profitable sales, reduce expenses, enhance operating results, and grow long-term profitability. But the strategy instead chipped away at profits. In the first quarter of 2005, the operator suffered a net loss of $153 million. In December Winn-Dixie was dropped from the Standard & Poor's 500 Index.

Now it's up to Lynch to put Winn-Dixie back on track. Meanwhile the losses tied to its restructuring are expected to keep on coming.

Meijer, Inc.

The grandfather of the supercenter format, Meijer has been making moves that clearly show Michigan's largest retailer has no plans to surrender share in its fiercely competitive core market any time soon. Armed with a can-do attitude and an aggressive growth strategy, the 163-unit chain has launched a vigorous capital expenditures program, including opening nine new ground-up stores in 2005 and 40 major remodels.

But Meijer has had to make some tough calls, including last year's round of 1,900 management job layoffs--the largest work force reduction in Meijer's 70-year history. Nevertheless, while Meijer was once an advocate of keeping its doors closed on Sundays, it makes no apologies for its new approach.

Sav-A-Lot

Everyone knows you can't beat Wal-Mart on price. Or can you?

"Just look at the receipt," says Sav-A-Lot, the limited-assortment operator owned by wholesaler Supervalu. The largest limited-assortment operator in the United States, Sav-A-Lot, based in Earth City, Mo., has been rapidly expanding on the premise that you can give Wal-Mart a run on price, if your format and assortment are unique enough to fill a shopping need that Wal-Mart can't touch.

This is small-box retailing at its best, with under 2,000 carefully chosen items in square footage that ranges from just 14,000 to 18,000, the latter comprising the full-blown food/GM offering. The Supervalu connection grants the format rigorously tested custom brands, national advertising support, and scale in logistics and procurement.

With more than 1,200 Say-A-Lots in 38 states up and running, the retailer's agenda for fiscal 2005 includes 110 to 140 new combo stores, plus 50 conversions.
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Comment:The retail newsmakers: Progressive Grocer picks the merchants who'll make the headlines in 2005.
Publication:Progressive Grocer
Article Type:Cover Story
Geographic Code:1USA
Date:Jan 1, 2005
Words:5868
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