Published on: March 20, 2003The Washington Post reports this morning that as an accounting scandal enveloped Dutch-owned retailer Royal Ahold, the company’s six US supermarket chains went into “triage mode” to assure employees, customers, and suppliers that they were healthy and responsive.
William J. Grize, president and CEO of Ahold USA, told the Post that the company became a bit more “frugal” as it trimmed some of its remodeling plans, and that it communicated in writing with its employees in order to keep them informed as vents unfolded, as well as to allow them to be better able to answer customer questions.
At Giant in the Washington, DC, area, for example, a survey has revealed very little customer concern about the Ahold situation.
Grize also said that just two of 40,000 suppliers have asked for “modest adjustments” to payment terms, and that all vendors have been paid on time. He denied the notion that the company’s retail chains -- Stop & Shop, Bi-Lo, Tops, Bruno's, Giant of Carlisle, Internet grocer Peapod, and Giant Food of Landover – would have to raise prices to help deal with financial pressure on the company.
According this morning’s edition of The Wall Street Journal, Ahold’s creditor banks have approved a capital spending plan that will allow the US company to build or replace between 60 and 70 stores.
The accounting scandal with which the company is dealing revealed a half-billion-dollar overstatement of profits, significant issues regarding vendor allowances at the company’s US Foodservice division, and forced the resignation of the company’s CEO and CFO. The company is now being investigated by the FBI, the US Securities and Exchange Commission (SEC), and the US Attorney’s office, not to mention various Dutch entities.
Reuters reports that lawyers for US shareholders have filed at least 13 lawsuits against Royal Ahold.
And in other, related news, Royal Ahold confirmed it will seek arbitration to resolve financial demands being made by ousted CEO Cees van der Hoeven and departed CFO Michiel Meurs. Both men reportedly are demanding large settlement packages, and Ahold opted for arbitration to settle their claims.
In the US, Grize told the Post, "We went through this wide range of emotions, anywhere from shock and concern to denial and anger and ultimate resignation and acceptance, like you do when faced with death or a severe illness,"
Grize described the company’s US retail chains and the US Foodservice business as “two totally separate businesses in the way they are run,” and said that the synergies that had been expected when US Foodservice had been acquired never developed.
While Royal Ahold’s US chains have been listed as collateral in a recent financing deal, Grize said that all this means is that the stores have access to cash, not that they will be sold off. And he told the WSJ that he did not expect any of the US chains to be sold.
“I wish I could tell you that by this summer everything will go away,” Grize told the Post. “I believe that's highly unlikely. It's just a very, very complicated situation.”
- KC's View:
- It certainly is true that the markets are going to pay more attention to Ahold’s problems than customers will; one of Ahold’s great strengths in the US has been its near invisibility as an entity, allowing its chains to do business with as much local control as possible.
Grize has always struck us as a good guy. He’s certainly always been forthright and direct in his dealings with us, and you can’t say that about a number of executives in the industry. We think he probably has the kind of tough-minded approach that will see the US chains through these difficult times, which should be possible unless there are more surprises lurking out there.
As for the speculation about what chains might be sold off…well, there’s not much anyone can do about that. Witness our guest analysis from PlanetRetail.net, below…