Report: Matthews-based Harris Teeter considers selling chain

Report: Matthews-based Harris Teeter considers selling chain

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by ELY PORTILLO / The Charlotte Observer

WCNC.com

Posted on February 12, 2013 at 6:00 PM

Updated Wednesday, Feb 13 at 8:00 AM

MATTHEWS, N.C. -- Shares of Matthews-based grocer Harris Teeter jumped 6.6 percent Tuesday after reports that the company is considering a sale and has retained J.P. Morgan Chase & Co. to explore its options.

Harris Teeter operates 211 grocery stores, the majority of them in North Carolina. The company has been under increasing pressure from competitors such as Wal-Mart, which launched an aggressive ad campaign last year in Charlotte, and Publix, which is opening a Charlotte division and pushing into the region.

The company declined to comment on the possibility of a sale, first reported by The Wall Street Journal. “As a matter of policy, Harris Teeter does not comment on speculation,” said spokeswoman Danna Jones, in an email. The company employs thousands of local workers at its dozens of area stores and corporate headquarters.

Big rival chains such as Publix and Kroger are likely to size up Harris Teeter as a possible acquisition, Reuters reported, citing unnamed sources familiar with the matter.

Harris Teeter has undergone changes in the past few years, spinning off its American & Efird textile division to focus on supermarkets and changing its name from Ruddick Corp. to Harris Teeter Supermarkets Inc.

Harris Teeter is the 19th-largest food retailer in North America, with $4.5 billion in 2012 sales, according to Bloomberg data. The company has a market capitalization of just over $1.9 billion.

But Harris Teeter’s growth has slowed over the past two years, with the company opening only a handful of new stores and focusing on expanding and renovating its existing stores.

Harris Teeter now employs about 25,000 workers. In addition to the retail stores, its assets include a dairy in High Point and distribution centers in Greensboro and Indian Trail.

Crowded landscape

Although Harris Teeter operates in eight states and Washington, D.C., it is heavily concentrated in its home state. Two-thirds of the company’s supermarkets are in North Carolina. At the end of fiscal 2012, Harris Teeter also had 38 stores in Virginia, 14 in South Carolina, seven in Maryland, five in Tennessee, three each in Delaware and Washington, D.C., and one each in Florida and Georgia.

Many regional grocery chains have struggled in recent years. Bi-Lo, owned by a private equity firm, bought Winn-Dixie last year for $560 million, after both chains had emerged from bankruptcy court.

Food Lion, a Salisbury-based subsidiary of Belgian grocery conglomerate Delhaize, has closed more than 100 stores in the past two years, just under a tenth of its total stores. Florida-based Sweetbay, another Delhaize regional supermarket, recently closed 33 stores, a third of its total. And Delhaize closed the regional Bloom supermarkets last year.

Those various cuts at Delhaize North America have led the company to cut hundreds of jobs at its Salisbury headquarters, including last week’s announcement of 350 corporate layoffs.

Harris Teeter has faced tightening competition on its home turf. Wal-Mart opened an advertising campaign showing direct price comparisons last year, after knocking Harris Teeter out of its No. 1 grocer position in the Charlotte region in 2011.

The mega-retailer is also opening Wal-Mart Neighborhood Markets across the state. Those smaller format stores are the same size as grocery stores but offer what Wal-Mart says is SuperCenter low pricing.

To solidify its local market presence, Harris Teeter bought 10 Charlotte-area stores from Lowes Foods last year. In exchange, it gave Lowes six stores in smaller markets, such as Asheville and Gastonia, and paid Lowes $26.5 million.

Harris Teeter reported in January that sales rose 3.7 percent in its most recent quarter, to $1.16 billion. But the company’s quarterly earnings per share fell to 46 cents, down from 53 cents in the same period a year ago and below analysts’ estimates.

Publix is opening its first North Carolina store next year in Ballantyne, and has plans to expand.

The privately held company, based in Florida, has more than $27 billion in sales and operates more than 1,000 supermarkets.

Cincinnati-based Kroger, which like Publix is considered a potential acquirer of Harris Teeter, has more than 2,400 supermarkets and $90 billion worth of sales, but only 16 supermarkets in North Carolina.

Harris Teeter stock closed at $39.50 a share Tuesday, up $2.46.

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