CHARLOTTE, N.C. -- Matthews-based Harris Teeter has pushed past Wal-Mart and regained its spot as the No. 1 grocer in the Charlotte region, data released Monday show, as analysts speculated over whether the company will find a buyer.
A store swap with Lowes Foods last summer netted Harris Teeter eight new Charlotte-area locations and boosted the company’s market share, cementing its position as the region’s leading grocer by sales.
Harris Teeter had 23.7 percent of the market, up from 21.1 percent last year, data from sales-tracking firm Chain Store Guide show. Wal-Mart’s overall sales increased, but its share of the market fell slightly, to 20.4 percent. Food Lion stayed in the No. 3 spot, with its share of sales dipping slightly, to 17.4 percent of the total.
Andrew Jenkins, managing partner with real estate analysis firm Karnes, said solidifying its position in its most important market could make Harris Teeter more attractive to a buyer. The company said in February that it has hired J.P. Morgan to explore a possible sale, but hasn’t commented since.
“They may be looking for a suitor,” Jenkins said. “Do you want to sell yourself as the No. 2 in the market, or the No. 1?”
The store swap with Lowes Foods was announced in June. Harris Teeter exchanged six stores in smaller markets for 10 Charlotte-area Lowes Foods stores. Harris Teeter also paid Lowes Foods $26.5 million.
“That was a great asset swap for Harris Teeter,” said BMO Capital Markets analyst Karen Short. “They swapped assets in rural locations that weren’t really true to their core. It was the right strategic move.”
The move also cut Lowes Foods’ share of the Charlotte market sharply. Winston-Salem-based Lowes Foods was left with only five stores in the area, and cut its share of the Charlotte region market to 1.2 percent, down from 3 percent in 2011.
Jenkins said the store swap with Lowes will probably also help Harris Teeter fend off Florida-based Publix as that grocer opens a new Charlotte division. Publix broke ground on its first Charlotte store last week in Ballantyne, and will start work on a South End store soon.
“(Harris Teeter) might as well get those good spots up and running before Publix comes in,” he said of the former Lowes Foods locations.
Data from Chain Store Guide showed Wal-Mart edged past Harris Teeter into the No. 1 grocer spot in the Charlotte region in 2011.
Wal-Mart has been trying to lure shoppers from Harris Teeter, which was long the leading grocer and hometown company but perceived by many shoppers as having higher prices. Last year, Wal-Mart targeted Harris Teeter with an aggressive, head-to-head price comparison advertising campaign. The company touted what it said were lower prices for the same goods, and ran a barrage of commercials on television, radio and in print.
Though Harris Teeter is back in the No. 1 spot, Wal-Mart also owns and operates Sam’s Club. Together, Wal-Mart and Sam’s Club accounted for 26 percent of grocery sales in the Charlotte market.
Possible Harris Teeter buyer
With a market capitalization of just over $2 billion and 211 stores, analysts say Harris Teeter could be an attractive purchase for larger grocers such as Kroger, Publix or Ahold, the owner of Giant. Karen Short, with BMO Capital Markets, said those chains – all several times larger than Harris Teeter – could buy the company.
Although she said Harris Teeter probably made a smart business move swapping stores with Lowes Foods, regaining the top spot in Charlotte won’t necessarily influence a buyer, Short said.
“If you’re a strategic (buyer), are you focused on making an acquisition just because it’s No. 1?” Short asked.
Harris Teeter disclosed in February that two private equity firms approached the company, interested in an acquisition. Short said she considers that an unlikely scenario, as Harris Teeter is not a struggling chain that a private equity firm could seek to resuscitate and sell off.
“The private equity thing perplexes me a bit,” she said.
Short thinks that out of the possible candidates to buy Harris Teeter, Publix and Netherlands-based Ahold are more likely than Kroger. She said Kroger, which has a reputation for financial discipline, is unlikely to offer a price Harris Teeter would find compelling.
Ahold completed the sale of a European grocery chain for more than $3 billion in March.
“They’re in more than a comfortable position to make that kind of acquisition,” Short said of buying Harris Teeter.
Shares of Harris Teeter are up more than 12 percent since Feb. 12, when the possibility of a sale was first reported. On Monday, the stock closed down $1.10, or 2.6 percent, at $41.61 a share.
Changing grocery market
The Lowes Foods-Harris Teeter exchange was just one of many changes in the Charlotte grocery market in recent years. Whole Foods has opened its first Charlotte store, as has Wal-Mart’s Neighborhood Market, a slimmed-down version of the SuperCenter that offers mostly food items. And Publix, a tough competitor with almost 1,100 stores, has begun a statewide expansion in North Carolina.
Chain Store Guide data cover a statistical area that includes Charlotte, Gastonia and Rock Hill, as well as the surrounding areas.
The data also showed that Food Lion continued to lose market share, even though its sales numbers increased. The Salisbury-based company has launched an initiative to reduce prices on core items, renovate and rebrand stores, and redo its produce sections to increase freshness in a bid to win back shoppers.
“Food Lion is very pleased with its performance in the Charlotte market, especially since the implementation of our new brand strategy and fresh produce initiative last year,” said spokeswoman Christy Phillips-Brown in an email.