Harris Teeter Mulls Sale of Chain: Report

Regional supermarket chain Harris Teeter is considering a sale, according to published reports. The Matthews, N.C.-based company has confirmed the hiring of New York-based J.P. Morgan Securities LLC to help it discuss "strategic alternatives" with "certain parties," but cautioned, "There can be no assurance that these discussions will result in any transaction." Harris Teeter declined to provide any further information until the discussions are concluded.

“As they’ve grown to 200-plus stores in the eastern U.S., they’ve entered an extremely competitive arena -- fierce competition in the Mid-Atlantic region from Ahold’s Giant and Stop & Shop stores, Wegmans, Target, Supervalu, ShopRite, etc.,” said industry observer Jeremy Diamond of the Diamond Group in Baltimore, where Harris Teeter opened a store in 2011. “In the Southern region, Publix and The Fresh Market are also expanding rapidly into other states. As a public company, Harris Teeter has to maximize shareholder value as well. The company has a solid store base, caters to a higher household income bracket in most of the neighborhoods where it operates, and would have multiple competitors interested in buying the company."

Publix and Kroger are said to be potential purchasers of Harris Teeter, according to a Reuters report citing unnamed sources. Diamond posited that “companies like Ahold, Whole Foods, Redner’s, ShopRite and Wegmans would benefit from purchasing all or part of Harris Teeter.”

According to Diamond: “A deal could happen if all the pieces fall into place. Especially with a publicly traded firm, the shareholders want maximum value and would have the final vote. It would need to be a win-win deal for everyone: the purchaser, Harris Teeter and the shareholders."

The company spun off its American & Efird textile division in its first quarter of fiscal 2012 to concentrate on its supermarket business and changed its name from Ruddick Corp. to Harris Teeter Supermarkets Inc. Over the past two years, Harris Teeter has opened relatively few new stores, preferring to focus on expanding and renovating its existing locations. Last year, it acquired 10 Charlotte-area stores from Lowes Foods, in exchange for which it gave Winston-Salem, N.C.-based Lowes six stores in smaller markets and paid the company $26.5 million.

Harris Teeter posted a 3.7 percent sales increase in its most recent quarter, to $1.16 billion, but its quarterly earnings per share for the same period fell from 53 cents last year to 46 cents, below analysts’ estimates.