2000 — Retailing in the New Millennium

MMR, June 25, 2001

January

* Wal-Mart Stores Inc. and Kmart Corp. announce separate alliances designed to strengthen their positions in the expanding world of Internet-based retailing. Striking first, Kmart reports the formation of a stand-alone E-commerce company, BlueLight.com. The venture, formed in partnership with Softbank Venture Capital and Yahoo! Inc., will provide customers with free Internet access and the opportunity to buy products and services online. The BlueLight.com service, which will include a wide choice of Kmart items, will be promoted on Yahoo!Shopping, a popular web site. A day after the Kmart announcement Wal-Mart unveils a strategic alliance with America Online Inc. (AOL) for a cobranded Internet service. The arrangement, which features a customized version of AOL's CompuServe service, calls for the two companies to work together to increase the availability of local Internet service to small communities. Only about 60% of the towns serviced by Wal-Mart currently have local Internet access. Wal-Mart and AOL also plan to explore the best ways to market a full range of next-generation interactive services and devices, such as AOL TV, that are designed to appeal to Wal-Mart customers.

* Wal-Mart enters a new era as David Glass steps down as president and chief executive officer. He will be succeeded by Lee Scott, who was named chief operating officer and vice chairman one year ago. Glass, who led the company during a 12-year period that saw it become the world's largest retailer, will remain chairman of the board's executive committee for at least the next year. The change in leadership comes as the chain continues its expansion into new areas, including E-commerce with a stand-alone company called Wal-mart.com Inc. Seeking to lift its Internet presence, Wal-Mart recently opened a revamped version of its web site, which allows shoppers to choose from among 600,000 products--twice as many as the retailer offered before--and also book hotel rooms and buy airline tickets.

* Despite unseasonably warm weather that impacted clothing sales, a strong start after Thanksgiving enabled many of the nation's retailers to meet industry and chain forecasts for the holiday season and end the century on a high note. For 1999 discounters' sales were up 9.5% over last year, with same-store sales up 6.9%, a full point better than the 5.9% gain of 1998. Overall sales at drug chains, which were largely unaffected by the weather, were up 9%, compared with an 8.2% rise last year, while same-store volume increased an impressive 7.3%, topping 1998's 6.8% gain. While overall sales for supermarkets rose 3.1% compared with 2.5% in 1998, competition for consumers' food dollars kept same-store sales growth level at 1.3%.

* Facing strong opposition from the Federal Trade Commission (FTC), Royal Ahold NV cancels its $1.75 billion purchase of Pathmark Stores Inc. Following the announcement Pathmark's privately held parent company, Supermarkets General Holding Corp., issues a statement claiming that Ahold's action breaches its merger agreement and accuses the Dutch retailer of not making its best effort to close the deal. An Ahold spokesman says the company had indicated a willingness to divest as many as 30 stores in order to secure approval for the transaction. Separately, Ahold agrees to acquire a 50% stake in ICA Group, Scandinavia's largest food retailer. The $1.83 billion deal for a partnership in the privately held chain of 3,100 stores in Sweden, Norway and parts of Eastern Europe, marks one of the biggest deals in Ahold history. The acquisition will boost Ahold's European sales to nearly $19.3 billion, slightly less than half of its worldwide total.

* Rite Aid Corp. wins agreement from lenders to delay until July 11, 2000, the release of several financial reports--including the results for the fiscal 2000 third quarter that ended November 27, 1999. The move comes one month after the appointment of a new management team and several weeks after a new accounting firm, Deloitte & Touche LLP, is hired to reaudit the company's results for fiscal 1997, 1998 and 1999. The troubled retailer also reports a disappointing 5.9% increase in same-store sales for December, compared with double-digit gains for rivals CVS Corp. and Walgreen Co. Retail analysts suggest the double dose of bad news may imply that no quick turnaround is in the offing and that the company's problems may be more serious than expected.

* In a transaction expected to be completed early this year, Kroger Co. agrees to purchase 20 Kessel Food Markets, located primarily in Flint and Saginaw, Mich., for an undisclosed amount of cash. The stores, which will continue to operate under the Kessel banner, will become part of Kroger's Michigan marketing area. The company currently operates 85 Kroger stores in the state.

* The majority of Grand Union Co.'s shareholders reject a proposal from UBS AG, an 8.1% shareholder, calling for the election of a new board of directors that would consider such alternatives as a merger or sale of the company. Grand Union issues a statement noting that other primary shareholders oppose the plan and adds that the chain will take appropriate action to maximize shareholder value.