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Spectra Energy Corp. Message Board

  • mentges mentges Sep 9, 1998 1:30 PM Flag

    WSJ - Text part II

    rating and an 18-month price target of $4.75. He
    is the only analyst to
    actively follow it.

    Why is Mr. Telzrow so upbeat? Southland is still the
    top name in
    convenience stores, with strong
    locations and heavy customer traffic.
    And its
    modernization of its inventory promises gains in
    productivity,
    revenue and profit margins.
    Until recently, its
    stores have been forced to fly blindly when it
    comes
    to tracking customers' purchase patterns. Unlike big
    retailers,
    most 7-Eleven stores lack such basic features as
    bar-code scanners at
    the cash registers. Clerks at most
    stores long have been responsible for
    memorizing
    prices, while store managers had no means to accurately
    study
    purchases.
    That may soon be history. The company is in the
    middle of rolling out
    a new electronic
    retail-information system designed to track inventory
    and alert
    store managers of fast-moving items. Installation began
    in the
    second quarter. So far, the systems, which
    have been under development
    for four years, are in
    500 of Southland's roughly 5,500 North
    American
    franchise and company-owned stores. Southland expects to
    have about 2,500 in place by the end of the year, with
    the rollout to be completed
    at the end of
    1999.
    Among the benefits seen by the company and Mr.
    Telzrow: Poor sellers
    will be taken off shelves, while
    inventory will be stocked based on
    customers'
    purchases.
    "Before, it wasn't exactly an environment of
    cigar boxes [used as
    tills] and best guesses," says
    James Keyes, Southland's chief financial
    officer.
    "Let's say it was somewhere in between that and the
    environment
    that's here today."
    Moreover, Southland is starting
    to consolidate its delivery
    operations through
    combined distribution centers, where vendors
    deliver
    goods to a central site instead of each store.
    Southland then ships all
    the products a store would need
    in one shot. The centers, which are in
    about half
    of the company's U.S. markets, are modeled after a
    successful
    system at its Japanese operations. The centralized
    distribution allows
    stores to be stocked daily. This in
    turn enables Southland to expand its
    selection of
    fresh foods, such as fruit and deli-style sandwiches, a
    key
    growth area. Mr. Telzrow notes that until recently, the
    company's spending to
    develop and run the centers has
    been a drag on operating earnings. But
    he expects
    that to change as the centralized distribution boosts
    sales.
    Already, same-store sales have posted gains in each of the
    past 13
    months.
    Sales also are getting a boost
    from new products, such as Cafe
    Coolers,
    Slurpee-like drinks in cappuccino and mocha flavors that
    sell
    for much less than similar products at rivals. Mr.
    Telzrow estimates
    that Cafe Coolers added one
    percentage point to sales growth in the
    second
    quarter.
    Another fan is Frederick "Shad" Rowe, whose
    Dallas hedge fund,
    Greenbrier Partners, has bought
    just under two million shares of
    Southland stock in
    the past year. Though he concedes that the
    turnaround
    process has taken longer than he thought, he's convinced
    it's well under
    way. Now that the company is
    getting the sales increases and a
    retail-information
    system, Mr. Rowe says, it's "beginning to operate
    like
    a normal efficient American retailer."
    To be
    sure, Messrs. Telzrow and Rowe aren't smitten with all
    of Southland's recent moves. One initiative Mr. Rowe
    cites as
    disappointing: an Austin test run of
    automated teller machines that cash
    checks, issue money
    orders and dispense prepaid long-distance
    phone
    cards, among other things. Southland's Mr. Keyes says he
    is pleased with
    the initial results, but the
    company hasn't yet decided on a national
    rollout. Mr.
    Rowe, however, hasn't been impressed thus far. "Not
    one
    store has told us they think this has added a single
    penny to same-store
    sales," he says.

 
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