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Southeastern Grocers’ Reorg Related to Failed IPO?


The comprehensive management shakeup this week at Southeastern Grocers, parent of the Bi-Lo, Winn-Dixie and Harveys banners, may stem from the Jacksonville, Fla.-based retailer's failed attempt to mount a successful initial public offering (IPO), according to industry expert Burt P. Flickinger III, managing director at New York-based Strategic Resource Group.

The pressure on the company is magnified by Albertsons' impending IPO, with which Southeastern Grocers would want to be favorably compared, particularly during this present era of robust merger-and-acquisition activity, notes Flickinger. As such, the executive moves could have resulted from a desire on Southeastern Grocers' part "to stimulate additional performance to lead to an IPO," he says.

While acknowledging that major changes of senior merchants at a company twice within a single year was "surprising," Flickinger notes that it's not unusual for a new CEO to restructure an executive team after a half a year of evaluation and analysis. When asked what impact Ian McLeod had made at Southeastern Grocers since being named to helm the company this past January, Flickinger says it's too soon to tell because it generally takes about two years to assess a new CEO's performance.

Florida Changes

The massive overhaul of its Harveys and South Florida leadership teams struck Flickinger as most "shocking," in light of his view that Winn-Dixie is the more promising business on which to build. "Harveys never had sufficient size and scale to be a major factor versus the competition," he said, while Winn-Dixie had once dominated its Florida markets before faltering in this century.

"It seems the company could have been doing better in Florida," observes Flickinger, citing retailers such as BJ's Wholesale Club, Costco, Walmart and, of course, Publix, all of which operate successfully in the densely populated and demographically diverse state, where there would seem to be ample room for a wide range of banners with different pricing strategies and formats. Meanwhile, a much tougher competitive climate prevails in other southeastern states, such as the Carolinas and Georgia, he adds.

Flickinger also questions why Southeastern Grocers hasn't yet tried to re-establish the Winn-Dixie banner in New Orleans and other Louisiana markets, as well as in Alabama and Mississippi, locations where it had once done well.

In general, Flickinger's take on Southeastern Grocers is that "it could or should have been the best of times" for the company, given the population, income and demographic growth in its market area, which includes many Gulf Coast regions where it doesn't have to contend with the likes of more formidable regional contenders like Kroger.

If Southeastern Grocers is indeed gearing up to file another IPO, Flickinger says it will need to show consistent gains in same-store sales, operating income and EBITDA, as well as making such consumer-facing changes as revamping stores to resonate with customers. "As the competition improves, Southeastern Grocers needs to get better at both the top and bottom lines," he asserts, adding that he doesn't anticipate that the company would attempt to file a new IPO for at least several months.

Southeastern Grocers declined to comment on reports of the major reorganization, which saw CMO Bill Nasshan take the leadership reins for Harveys and the south Florida region; the hiring of Mark Scates, once McLeod's colleague at Australian grocer Coles, as SVP of store operations; the appointment of Steve Strachota as SVP of supply chain; the appointment of new regional VPs at Winn-Dixie; the splitting of Bi-Lo into two divisions, Bi-Lo East and Bi-Lo West; and the departure of a number of executives.

"Such significant leadership changes are never easy," McLeod acknowledged in an internal memo leaked to the press, which the company has confirmed as factual, "but I firmly believe that the changes … will provide us with renewed energy and leadership direction to enable us to face our turnaround challenges with increased enthusiasm and confidence."


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