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Rite Aid asset transfer to WBA 85% complete

BY Michael Johnsen

Rite Aid on Monday reported the successful asset transfer of more than 85% of the stores the company is selling to Walgreens Boots Alliance. As of March 2, Rite Aid has transferred 1,651 stores and related assets to WBA, and has received cash proceeds of $3.6 billion, which the company continues to use to reduce debt.

Under the Asset Purchase Agreement, WBA will purchase a total of 1,932 stores, three distribution centers and related inventory from Rite Aid for an all-cash purchase price of $4.4 billion on a cash-free, debt-free basis.

The majority of the closing conditions have been satisfied, and the subsequent transfers of Rite Aid stores and related assets remain subject to minimal customary closing conditions applicable only to the stores being transferred at such subsequent closing, as specified in the Asset Purchase Agreement.

Rite Aid expects to complete the store transfer process in the spring of 2018.

After all stores are acquired, stores are planned to be converted to the Walgreens brand in phases over time. The stores to be purchased are located primarily in the Northeast and Southern U.S., and the three distribution centers to be purchased are located in Dayville, Conn., Philadelphia, Pa., and Spartanburg, S.C.

The deal was first announced in September.

More recently, Albertsons announced its intent to merge with remaining Rite Aid stores as part of a deal that would make the new Albertsons/Rite Aid combo the fourth largest pharmacy in the U.S.

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Hy-Vee expands Great American Milk Drive participation

BY David Salazar

Hy-Vee is committing in March to help deliver milk to food banks in the eight states it serves by partnering with the Great American Milk Drive. Throughout the month, Hy-Vee shoppers will be able to donate $2 toward the purchase of a half-gallon of milk or $4 toward a full gallon at the checkout. At the end of the month, Hy-Vee said all donations would be used to buy milk from area processors for local food banks.

This year’s effort marks an expansion of Hy-Vee’s participation in the Great American Milk Drive campaign. Last year, the West Des Moines, Iowa-based company’s shoppers donated enough for more than 120,000 gallons of milk in a two-week period.

“Hy-Vee is expanding its participation in The Great American Milk Drive to the entire month of March this year to provide even more assistance to help alleviate hunger,” Hy-Vee executive vice president, chief marketing officer and co-COO and Jeremy Gosch said. “Through the generosity of our customers, and with participation from all of Hy-Vee’s 246 stores, our goal is to increase donations and make nutritious milk available to those in need.”

The campaign is carried out in partnership with Feeding America, Milk PEP and the National Dairy Council. Sponsors this year include Dean Foods, Kellogg’s, Kraft Heinz, Mondelez International, Post Holdings, Hiland Dairy, Kemps and Anderson Erickson Dairy.

In Hy-Vee’s eight-state region, there are roughly five million food insecure people, according to Feeding America, with milk constituting the most request and least available items in food banks nationwide.

“The Great American Milk Drive offers us all an opportunity to make a meaningful impact for local families throughout our eight-state region,” Gosch said.

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The Vitamin Shoppe in search of new CEO

BY Michael Johnsen

The Vitamin Shoppe last week named Alex Smith executive chairman and announced the search for a new CEO following the departure of current CEO Colin Watts, who is staying with the company through the end of May to ensure a smooth transition.

Despite a strong market base, the new specialty retail chief executive will be challenged with the continued erosion of customers from in-store to online. Though, current leadership has a plan in place, Smith noted.

“Overall, 2017 yielded disappointing results,” Smith said. “Over the past couple quarters, Vitamin Shoppe has begun a turnaround and signs of progress are already visible. We have also reached a mutual agreement with our CEO, Colin Watts to transition the business to new leadership by May. During this time, the entire organization will be committed to implementing the New Base Plan developed by management. In my new role as executive chairman, I will work closely with our leadership team in that effort while we execute our search for a new CEO.”

In a conference call with retail analysts, Smith and Watts contended that the underlying wellness market dynamics were strong. “As we built our new plan, we started with a deep analysis of the wellness market and the wellness consumer,” Watts said. “The market for wellness continues to have very attractive attributes, including solid underlying growth projected by multiple sources to be high-single digits, driven not only by baby-boomers’ obsession with quality of life, but also millennials and Gen Zers who’re spending even more than their parents on wellness, fitness and better-for-you products.”

“We’re facing the same situation we have for most of 2017. The vast majority, over 80% of our decline sits in the sports and weight management business,” Watts said. “The VMS side of the business continues to be fairly stable as we move forward.”

And, he added, product innovation and convenience offerings across juices, bars and RTDs represent a lot of promise. “We’re also seeing new brands with rapid growth profiles bringing new excitement to the market, particularly in the areas of functional foods, sports nutrition and lifestyle categories such as aromatherapy and natural beauty,” he said.

The challenge for the incoming CEO will be in capturing the wellness consumer as their shopping patterns continue to evolve. “While the wellness market itself continues to grow, what has changed is the way consumers navigate and shop this market,” Watts said. “The wellness customer, while still purchasing the majority of their products at traditional retail stores like ours, are rapidly shifting the way they discover, navigate, decide and ultimately ascribe loyalty based on aggressive adoption of mobile, Internet tools and social media.”

Smith and Watts are currently implementing a new strategy dubbed the “New Base Plan” that they expect will establish The Vitamin Shoppe brand as consumers’ wellness authority.

Own brands is another area of promise for the supplement retailer. “Our continued focus on private brands is driving increased penetration, up 95 basis points in fourth quarter 2017, and 110 basis points for the full year,” Smith told investors last week. “During the quarter, we re-launched our MyTrition line with new packaging and products; and earlier in the year, we introduced new innovation across multiple brands. We are seeing particular success with the plnt brand, up 25% and the ProBioCare brand, up 10% in 2017.”

Private label currently accounts for 22% of The Vitamin Shoppe sales. “In 2018, we’ll be introducing several unique product lines or exclusive waivers from top vendors to increase the level of innovation and differentiation of our assortment in a heavily competitive market,” Watts said. “A couple of good examples include unique flavors of the rapidly growing Bang ready to drink line and the recently launched Jay Cutler line of sports nutrition products, both of which are exclusive to The Vitamin Shoppe.”

The Secaucus, N.J.-based specialty retailer posted total net sales in the fourth quarter of $268.8 million, representing a decline of 11.8% compared to $304.9 million in the same period of the prior year. Total comparable sales were down 4.6% in the quarter or down 3.2% adjusting for the timing of the Christmas holiday.

The specialty operator opened three stores in the quarter.

Smith was named to the Vitamin Shoppe board almost one year ago.  Prior to being named to the board, he had served as president and CEO of Pier 1 Imports, a specialty home furnishings retailer. And from 2001 to 2007, Smith served as group president of the TJX Companies where he oversaw the operations of Home Goods, Marshalls and TJ Maxx. He was also instrumental in the development of the TK Maxx stores in the United Kingdom as well as running the company’s international operations.

For the prior 20 years, he held positions of increasing responsibility at other retailers including; Lane Crawford, Owen Owen and Harvey Nichols in the U.K., Hong Kong and Singapore. The Vitamin Shoppe board selected Smith as a director due to his experience in retailing and brand management, including his extensive public company experience as a senior executive and director.

Also serving on the Vitamin Shoppe board is Tim Theriault, former chief information officer, Walgreens Boots Alliance, who was named to the board in 2016.

 

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