business news in context, analysis with attitude

Global notes & comment from…

Publix has announced that its sales for the fourth quarter of 2003 reached approximately USD4.4 billion, a 6.9% increase year-on-year. Comparable-store sales were up by 1.4%. Net earnings for the quarter were 14.6% higher at USD177.7 million. For the year as a whole, total sales reached USD16.8 billion, a 5.8% uplift compared to 2002. Comparable-store sales for the year were flat. Net earnings for 2003 reached USD660.9 million, up by 4.5%. The company trades through over 800 hypermarkets, superstores and c-stores in Florida, Georgia, Alabama, Tennessee and South Carolina and is evaluating the purchase of some or all of Ahold’s Bi-Lo and Bruno’s stores which were put up for sale earlier this year.

Publix’s ascent has been a relentless rise and is all the more remarkable when it is considered that 75% of its stores are located in just one state, Florida. When compared to the parlous state of its main regional rival, Winn-Dixie, the fact that Publix is maintaining flat-to-modest comparable store sales growth emerges as something of an achievement. Coupled with its robust store-opening programme, the company is generating strong top-line growth through the implementation of strong marketing and merchandising initiatives, such as the recent introduction of Publix GreenWise Market instore areas that sell a selection of natural and organic products including new private label ranges. The company’s innovative and nimble approach to grocery retailing should enable it to remain differentiated to, and therefore to some extent insulated from, the commoditised approach of Wal-Mart, although the giant’s encroachment will undoubtedly increase the pressure on all grocery players, Publix being no exception.

There may well be an opportunity to bulk up and gain more mass in the coming year thanks to the news that Ahold has put its Bi-Lo and Bruno’s businesses up for sale. Publix has said of the two chains that “certainly, we would be looking at them”, and it will be something of a surprise if Publix does not buy some or all of at least one of the chains. Opportunities to acquire decent grocery chains that are not on the brink of collapse are becoming few and far between, although the only note of caution that we would sound is that Publix has limited experience of major M&A activity. Its previous buys have been of isolated regional batches of stores, but we are confident that Publix is more than capable of handling a more sizeable deal and will probably be trading through over 1,000 outlets by the end of the year.
KC's View: