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Rite Aid under pressure to unload West Coast ops

BY DSN STAFF

NEW YORK Divesting itself of its West Coast store base certainly would place Rite Aid in a much more favorable position with regard to its debt load, merchandising and marketing synergies and supply chain efficiencies. So why not divest?

 

The question really is, can Rite Aid walk away from a baby-boomer-rich market in which it has not only invested heavily in the past few years but also represents 18% of its overall store base and 28.6% of its overall square-footage. And that answer may very well swing “no” unless there are an awful lot of zeros within any offer.

 

 

Historically, Rite Aid has suggested that the price has got to be so good that they can’t responsibly walk away. And that’s because Rite Aid is, in poker parlance, pot-committed to its West Coast stake. The chain has invested enough into its Pacific-Coast stores that the valuation would have to be sweet enough that the offer becomes their return on that investment.

 

 

Further, the deal would likewise have to more than make up for the smaller buying heft a post-divestiture Rite Aid would wield.

 

 

“The West Coast is a very strong contributor to our overall results,” commented Mary Sammons, chairman, then-president and CEO, during a conference call with analysts held around the time the CVS/Longs deal had been announced. “[The West Coast] is also a strong contributor to … scale, our ability to really have greater capacity to buy better and do what we do and leverage expenses,” she said. “We have strong market shares out there. We’ve invested a lot of dollars out there … frankly.”

 

 

CVS may be eliminated as a potential suitor given its acquisitions along the West Coast, namely Longs Drug, but Walgreens, Walmart and Tesco have all been identified by analysts as potential suitors — Walgreens in an effort to better combat CVS, Walmart because it’s looking to expand through smaller retail boxes in a real-estate saturated market and Tesco given its desires to expand significantly into the U.S. market.

 

 

Morgan Stanley analyst Mark Wiltamuth suggested that the West Coast operations may be a sound divestiture for Rite Aid given the fact that the stores are, in his belief “stronger profit generators” as compared to the chain’s East Coast operations in an April 2009 research note.

 

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Weis Markets names new CFO

BY Michael Johnsen

SUNBURY, Pa. Weis Markets last week named Scott Frost VP, CFO and treasurer.

Previously, Frost served in this position in an acting capacity. In this position, he will oversee all aspects of the company’s accounting and financial operations. He succeeds Rick Mills, who left the company in July.

“[Frost] brings strong professional credentials and extensive experience in the day-to-day financial operations of our company and our SEC compliance programs,” stated David Hepfinger, Weis Markets president and CEO. “He and the team he oversees will work in support of our company’s mission to increase sales and profits and in support of our marketing/procurement, store operations, corporate distribution and manufacturing teams.”

Frost, who is a certified public accountant, joined the company in 1983 as a staff accountant after graduating from Susquehanna University.

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Ahold reorganizes U.S., European businesses

BY Allison Cerra

NEW YORK Ahold on Thursday announced a series of changes in its European and U.S. businesses to create a strong platform for future growth.

The reorganization in both continents delineates the responsibility for running operations, supporting the operations and business development, the company said in a release.

Dick Boer, the COO for Ahold Europe, member of the corporate executive board and CEO of Ahold Netherlands, continues to be responsible for all European activities and has appointed Sander van der Laan to head Albert Heijn as its new general manager. Van der Laan will return to the Netherlands from his current role at Giant-Carlisle in the United States to start in January 2010.

Lawrence Benjamin, the COO for Ahold USA and member of the corporate executive board, continues to be responsible for all U.S. operations and has appointed Carl Schlicker as CEO of four newly reorganized U.S. divisions, including Stop & Shop New England, Stop & Shop Metro New York, Giant-Landover and Giant-Carlisle.

Commenting on the global reorganization, Ahold’s CEO John Rishton said “The changes we have announced today build a strong platform for future growth. We are further simplifying and streamlining our businesses and will be able to provide even greater focus on our customers. The changes will also allow Dick Boer and Larry Benjamin to devote more time to growth opportunities in existing and new markets.”

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