The Belgian press mentions that (50,12 EUR, 0,29%) is looking at the possible disposal of Harveys and Sweetbay. The disposal of loss-making Sweetbay doesn’t come as a surprise to us. Management indicated already that they are looking at all the options for the loss-making banner.
At the end of 2012 Sweetbay operated 105 supermarkets on the west coast of Florida. In 1Q13 34 of them were closed. Average selling space amounts to 25,000-50,000 ft/store and the product assortment includes 28,000-42,000 SKU’s. We estimate Sweetbay’s sales at about $ 950m this year or 5% of America’s total sales. Losses ($ 5m in 2013E) are expected to decline this year following the closure of the underperforming stores.
Harveys operates 73 stores in Georgia, Northern Florida and S Carolina. We estimate sales at about $ 900m this year and EBIT at $ 35m. Average selling space amounts to 25,000-45,000 ft/store and the product assortment includes 15,000-20,000 SKU’s.
Assuming an EV/EBIT of 9.0x we arrive at a price (EV) of about $ 270m or € 210m.
We maintain our Accumulate rating. Roland Smith who was appointed EVP and CEO of America last year has clearly started to streamline the business. Food Lion’s (75% of America’s sales) repositioning proves to be a success and Bottom Dollar Food’s losses are declining. We expect that will exit some countries in SE Europe such as Bosnia, Bulgaria, Herzegovina and Montenegro. Belgium is still struggling to reverse the market share declines. We are not convinced that a return to historic strengths (assortment, quality, health) will be sufficient to reverse the negative market share trend in Belgium.