Three Strikes and Penn Traffic is Out
Having filed
for bankruptcy protection for the third time in 10 years, Penn Traffic
has decided that it will now seek to sell all or at least most of its
assets.
The company,
which operates 79 stores in four states, may already have a buyer or
buyers in place. Retail analyst Burt P. Flickinger III told The Post-Standard that
an investment group was looking at "putting the company back together."
"If
you get some of the better people from before and new capital in, I think
it could work. The company can be saved rather than auctioning
it off," he said. "Sometimes, financial advisers push for that,
because they get fatter fees."
In announcing
its decision to file for Chapter 11 protection, the company said it intended
to keep operating stores.
"Our P&C, Quality
and BiLo supermarkets remain open for business to serve our customers and communities,"
Gregory Young, president and chief executive officer of the company, said in
a press release. "We intend to continue to work closely with our vendor partners
to provide the fresh products and good value that our customers have come to
expect from our stores."
Discussion
Questions: What is the scenario that you see playing out for Penn Traffic Company?
Is the company a good fit for another retailer to acquire?
Sometimes a company just runs out of steam and no longer satisfies consumers’ desires. Penn Traffic should sell off its pieces. Hopefully no company will buy the whole PT show.
It’s retail evolution. Sometimes you need to discover if a brand is even viable anymore. I guess this is where focus groups come in handy. No use saving something that can’t be saved.
The poor old guy is on life support. He will never race his friends down the street again; he will never know the affection of a young customer as he did in his youth. The best that he can hope for is that his stores will be transplanted and make life better for another company.
For Whom the Bell Tolls
by John Donne
No man is an island,
Entire of itself.
Each is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.
As well as if a promontory were.
As well as if a manner of thine own
Or of thine friend’s were.
Each man’s death diminishes me,
For I am involved in mankind.
Therefore, send not to know
For whom the bell tolls,
It tolls for thee.
Most likely of the whole entity 50% (of stores) are making a profit. If they were purchased by someone used to running low volume markets in rural type areas they could be a success; like a Weis Markets.
Penn Traffic, having filed for Chapter 33 (that is Chapter 11 three times), is gone. Here was a company way ahead of its time. They operated a department store and supermarket under one roof long before Wal-Mart even thought about a supercenter.
Penn Traffic was done in by the spreadsheet wizards. These are the financial geniuses who bought the company with no money down, stole the asset base and never invested in operations. Like Pathmark, Penn Traffic was leveraged out of existence.
What looks good to a million dollar a year spreadsheet wizard who has never run a company, simply does not fly in the real world. Now the store leases will be sold off in the most depressed commercial real estate market we have seen in years. Any financial buyer will only try to clean up the number to flip it to someone else while making a great profit. Good store locations will be bought up and the balance will go dark.
What Frank Dell said!!!
Much can be learned from this retailer’s story. More often than not, a retailer’s struggles can be directly traced to their customer satisfaction metrics. Other factors invariably enter into the picture, such as supply chain/inventory management, etc, however, if the customer keeps telling you that something isn’t right, you need to respond. I have seen Penn Traffic’s stores and while I will never say anything negative here about ANY retailer, we all know that every retailer can always improve. It is a shame to see this happen, however, there were warning signs.
I worked with some folks at the P&C Banner before they were bought by Penn Traffic. At that time they were part of a conglomerate, the other half of the corporation made aircraft landing gear. What an interesting combination, the steady cash flow of the supermarket business with the cyclical but high gross margin of the aircraft business. As someone else has said, at some point the financial leveraging began and they have never been the same.
It’s a solemn garage sale, where items are sometimes surreptitiously removed without being paid for. There will be a certain amount of “bundling,” where various things are thrown into the deal for free just to get them off the books. Many jobs will be lost, and the most important remaining is the liquidation overseer, which is short-term.
I have to say I’m very disappointed: not that PT has finally seen the light (or is it the lack of light?) but that David (Livingston) hasn’t offered up his usual trenchant observations…where are you Dave?
Probably be piecemealed off to a number of retailers such as Weis, Price Chopper, Giant, Tops, Hannaford, Shop Rite, and various independents. Maybe about half the stores can continue to remain open under a new operator.