Thursday, July 16, 2009

Harris Teeter in Maple Lawn

Brent from the HowChow blog emailed me yesterday asking if I knew what was going on with the Harris Teeter store in Maple Lawn. “Someone is writing comments on HowChow and elsewhere that Harris Teeter has decided not to open the store in Maple Lawn.”

I called my main Maple Lawn man, Chuck Breitenother at KLNB to see if he could shed some light on the situation.

“They just decided to push the opening back to the fourth quarter of this year,” he told me.

The store is essentially ready to go. All of the store fixtures are installed, the parking lot lighting is in and the spaces are striped. The physical plant is fully operational. All the store needs is food and employees. It now appears that those will be added just in time for Thanksgiving and Christmas.
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12 comments:

  1. macsmomJuly 16, 2009 5:20 PM

    Why???

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  2. FreemarketJuly 16, 2009 5:39 PM

    There must be more to the story than this. This doesn't make any sense.

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  3. AnonymousJuly 16, 2009 7:54 PM

    Of course. A store needs more than just employees and food. It needs customers, too. Did the number of Scaggsvillians not grow as quickly as the rosy projections?

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  4. AnonymousJuly 16, 2009 8:30 PM

    I'm looking forward to this opening. It will give us a great alternative to Bloom, Weis and Giant.

    I predict that the Bloom will close within the first year of this store opening.

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  5. HowChowJuly 17, 2009 7:25 AM

    Freemarket -- I certainly believe that a company would push a new store opening into the first week of its next fiscal year. It pushes many of the start-up costs into that 2010 fiscal year. Plus, it means that this store won't have been open 365 days when they report "sales by store" for the 2010 year. Often, companies omit stores that haven't been open a year. That seems important enough to retail industry analysts that executives would like to have almost two years to get the store up, working and attracting customers. I don't underestimate the amount that public company executives run businesses with their eyes on the accounting.

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  6. HowChowJuly 17, 2009 7:27 AM

    Freemarket -- I just realized that Wordbones says the store will open in the fourth quarter of this year. That is the "fourth quarter" of the calendar year. HT's parent company starts its fiscal year on October 1, so opening October 6 is the first week of their fiscal year.

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  7. FreemarketJuly 17, 2009 9:15 AM

    Howchow- that still does not make any sense to me. You are basically saying that these execs are leaving money on the table by delaying the opening to make the sales by store look better. All while incurring rent and other fixed costs in doing so. Yeah, that doesn't work.

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  8. HowChowJuly 17, 2009 9:31 AM

    Freemarket -- I don't know that this costs HT any cash. For all I know, they don't have to pay rent until they occupy the place. But I'm certainly saying that public company executives will, at times, leave the company's cash on the table because it improves a metric in the financial reporting on which the executives are judged. Classic principal-agent problem.

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  9. AnonymousJuly 17, 2009 11:15 AM

    I know that for the opening of a HT in Virginia, they had a certain target date to open, and when they were not able to open by that date, they did intentionally delay the opening by months to suit HT's needs despite being ready well before. I am guessing the financial reasoning listed above was the driver.

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  10. FreemarketJuly 17, 2009 12:26 PM

    What do you think matters more in how an exec is judged: sales by store unadjusted for the % of the year in which the store is open, or the bottom line net income? Obviously it is in the best interest for HT to delay the opening, but the reason is not at all clear.

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  11. HowChowJuly 17, 2009 1:49 PM

    Freemarket -- I'm sure every company differs. But I have seen many analyses based on change in revenue/income per store where they omit any store that hasn't been open for two full years. They wait until they have two full years of data (and don't look at partial years adjusted or unadjusted). If HT uses that, then the Fulton store wouldn't be counted until FY2011 v. FY2012. It gives people a long time to get the store working well.

    Again, I am not saying this is wrong. I'm just saying that it seems believable to me that HT might let a store sit empty until October 2009 (especially if they don't pay rent until they take possession, which may or may not be in this lease). But, of course, anything could happen.

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  12. HowChowJuly 17, 2009 1:57 PM

    And Freemarket -- Remember, those free market theories don't prove anything is in the best interst of HT. You guys collapse that agent/principal so often. It is clear that it is in the best interest of *the decisionmaker* at HT to delay the opening. We hope that it is in HT's interests as well, but those interests often diverge. ;-)

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