An improved fresh presentation at Winn-Dixie stores is a key aspect of parent company Southeastern Grocer's renewal strategy.
So Far So Good
With a more highly engaged workforce in place to execute strategic initiatives, Southeastern Grocers is beginning to see its strategy yield positive results, which then has a multiplier effect on the company’s culture.
Hucker points to the company’s 16.4% first quarter same-store sales increase and 21% second quarter increase as evidence. Those results were obviously aided by the pandemic, but Hucker notes the gains were better than those reported by rivals.
“We know that we have grown in market share and taken more than our fair share of market share to the chagrin of some of the national players,” Hucker said.
To gain share in the future, Southeastern Grocers is relying on a strategy that requires re-adjusting its portfolio of geographies and banners to focus on those it believes will give it the best chance of winning. The process was enabled by the fresh start the company gave itself in early 2018 by filing a voluntary petition for reorganization under Chapter 11 in the Bankruptcy Court. The prepackaged plan of reorganization saw the company re-emerge quickly and with greater financial flexibility to pursue a growth strategy centered on streamlining operations to focus on key growth markets and to undo some prior strategic decisions.
For example, after BI-LO and Winn-Dixie merged in 2012 and acquired the Sweetbay and Harveys banners the following year, there were plans to go public. However, efforts to integrate the stores, implement a new supply agreement and switch to an everyday low price strategy in 2016 didn’t work out. That’s about when Hucker joined the company, which had adopted the Southeastern Grocers name in 2015. His diverse background was seen as the ideal combination to execute a plan that involved deleveraging the balance sheet and stabilizing the business through a series of retail best-practices and cost-savings initiatives, improving sourcing and labor productivity and returning to a high-low pricing strategy. The company also opted to increase investments in its store base, loyalty program and private brands.
But getting the store base right was key. For example, in May of this year the company agreed to sell 62 stores, comprised of 46 BI-LO stores and 16 Harveys stores throughout the Carolinas and Georgia to the Food Lion subsidiary of Ahold Delhaize USA. In September 2020, an agreement was reached to sell an additional 23 stores, to Alex Lee, the parent company of Lowes Foods. In early December the company was still exploring options for 39 BI-LO stores and one Harveys location.
The moves were significant because they give Southeastern Grocers a go-forward retail footprint comprised of 420 stores located in five states operating under three banners with Florida accounting for roughly 76% of its locations with combined annual sales of $6.7 billion.
A Growth Strategy Revealed
Southeastern Grocers’ focus the past three and half years has been on right-sizing its footprint and improving the productivity of existing locations, which is a classic strategy for retailers looking to transform their operations. The company uses the term “renew” to describe remodeling and remerchandising efforts, which have been considerable. For example in 2018, 96 locations were renewed, followed by 53 in 2019 and 33 this year.
“By the end of the year we will have renewed, remodeled, converted or opened 55% of the entire company. We are just past halftime of the five-year transformation,” Hucker said.
The focus on renewals is working. Each store requires an average investment of about $1 million, which results in an approximately 10% increase in sales based on the performance of roughly 125 stores that went through the renewal process a year ago.
Store renewals are great, but for Southeastern Grocers to grow and to foster a culture of winning, the opening of new locations is also important. That was one of the more notable developments at the company this year where eight new stores were opened, including locations that had been acquired from failed retailers such as Earth Fare and Lucky’s Market.
Going forward, Southeastern Grocers has indicated to investors in regulatory filings related to a planned initial public stock offering that it could open as many as 10 stores annually.
“We will buy, build and convert,” Hucker said of the expansion strategy, with the composition of the 10 annual openings target being a combination of the three existing banners.