Wal-Mart has been compared to a retail plague: it kills off the weak, and makes everyone else sick. Economic illiterates (i.e. elected officials) propagate the illusion that a new Wal-Mart store means new jobs. In many markets, unfortunately, Wal-Mart represents a seismic shift in market share, which produces no new net jobs, just transfers them from weakened or dying merchants, into Wal-Mart cash registers. Call it the Circuit City Syndrome, or some other defunct chain store’s name — the impact is a form of economic dislocation. The latest victim is the grocery chain Bi-Lo, which this week filed for bankruptcy. The company, which is owned by a private equity investor, Lone Star Funds, filed for protection from creditors. The grocery chain operates 215 supermarkets in 4 states: North and South Carolina, Georgia, and Tennessee. The retailer said its stores will remain open during the Chapter 11 proceedings. According to papers filed in U.S. Bankruptcy court in Spartanburg, South Carolina, Bi-Lo listed debt of as much as $1 billion. Bi-Lo pointed out that its Chapter 11 filing was voluntary, and that it hoped to emerge out of bankruptcy as soon as possible. “On an operational level, we are making significant progress this year, and we have seen solid sales momentum and strong cash flow,” said Bi-Lo’s president. “Our strong operations and liquidity position continue to demonstrate the strength of our business model, and the company has continuously satisfied all of its obligations to date, under the term loan and otherwise.” The company said that in order to maintain business operations and customer service without interruption while addressing its debt maturity, a court-supervised restructuring was appropriate. “We intend to move through this process as quickly as possible, and we firmly believe that this course of action will better position Bi-Lo for continued growth and long-term success. As a result, Bi-Lo will be well positioned to continue building on the commitment we have made to our customers and the communities we serve.” Bi-Lo has received a $100 million debtor-in-possession (DIP) financing through GE Capital, which the chain hopes to use to meet its operational business obligations. Bi-Lo workers should not miss a paycheck, because the company has asked the court for permission to pay its workers without interruption. In its press release, Bi-Lo said, “One of BI-LO’s highest priorities is to ensure the restructuring process does not impact its customers. BI-LO expects its customer policies and programs, including its BONUSCARD?? and associated promotions, returns/exchanges and other special promotions, to continue without interruption.”
One grocery market analyst told Sprawl-Busters: “Part of Bi-Lo’s problem was being run by the Dutch conglomerate, Royal Ahold. There were several competitors in South Carolina, including Wal-Mart, Kroger, Lowes, Food Lion, Harris Teeter, Piggly Wiggly and Winn Dixie. Winn Dixie filed bankruptcy and left the state. Bi-Lo then was bought by a private equity group that cut expenses to the bone and ran it into the ground. Bi-Lo should have been sold off piecemeal a long time ago.” Lone Star Funds describes itself as “a global investment firm that acquires distressed debt and equity assets including corporate, commercial real estate, single family residential and consumer debt products as well as banks and asset rich operating companies requiring rationalization.” Lone Star was created in 1995. The principals have organized private equity funds totaling approximately $24 billion of capital that has been invested globally. On December 2, 2001, Sprawl-Busters illustrated how Wal-Mart would target an area where a competitor existed, to drive the competition under. According to the Business Journal of Charlotte, North Carolina, Wal-Mart decided to put a 200,000 s.f. supercenter in the Whitehall Commons shopping center in Charlotte. The existing anchor store in the Whitehall Commons was a Bi-Lo grocery store, which had been there for 5 years. “I don’t see why Bi-Lo won’t be successful even when we open,” a Wal-Mart official told the Business Journal. “They are a very successful grocery chain.” Bi-Lo has been in financial trouble for years. Bruno’s Supermarkets, a Birmingham, Alabama-based company, spun off from BI-LO in 2007. Sprawl-Busters reported on February 19, 2009 that Bruno’s, with 23 locations in Alabama and the Florida Panhandle, had also filed for bankruptcy earlier this year. Bruno’s is another Lone Star asset. Royal Ahold sold BI-LO and Bruno’s to Lone Star in December 2004. Just over 4 years later, both companies are in bankruptcy. In some parts of the south, such as Birmingham, Alabama, Wal-Mart owns as much as 50% of the grocery market. In the fall of 2003, consultant Retail Forward estimated that Wal-Mart controlled 19% of the supermarket industry. By 2003, Wal-Mart had become the nation’s largest food retailer. It’s total supermarket sales were almost the same as its next two competitors, Kroger and Albertson’s, combined. If Bi-Lo ends up going under, 15,500 workers will lose their jobs. When Wal-Mart boasts of its ‘new’ jobs, companies like Bruno’s and Bi-Lo gave up jobs to make Wal-Mart successful. As Retail Forward wrote in 2003, “Wal-Mart’s aggressive expansion will continue to wreak havoc and steal share away from conventional food, drug, and mass retailers at an alarming rate. Readers are urged to cut this article and email it to your local elected officials. Before they approve a Wal-Mart proposal, ask them to research the “havoc” that Wal-Mart has wreaked on competition in America. Remember chains like Bruno’s and Bi-Lo.