CARY, N.C. -- To the surprise of many in the industry, Terry Marks on Monday announced his resignation after only two years in his role as president and CEO of The Pantry.
But those who know him say Marks' desire to be closer to his family and the hassles of the commute to Atlanta were at the forefront of his decision, which comes at a time when a few of his initiatives are set to move forward. Multiple sources contacted for this story spoke to CSP Daily News on condition of anonymity.
If any undercurrent did exist, one obvious source would be stock performance. The Pantry's stock had gone from a 52-week high of $24.44 to yesterday's low of $10.77 (it closed at $10.83; its 52-week low is $10.54). It had been hovering in the $18 range for most of the summer but as of August fell into a $11-to-$12 slump. After news of Marks' resignation, it dropped almost 6%. Some believe that if it goes any lower, the chain may become vulnerable to a hostile takeover. Those in this camp speculate the purchase of all or a big chunk of the 1,650-store chain.Earnings covering the company's third quarter were mixed, with net income hitting $19 million or 84 cents per share, compared to $18 million or 80 cents per share in third-quarter 2010, Marks said earlier this month during the company's regular earnings call (click here for previous CSP Daily News coverage). But comparable-store merchandise revenue fell 1.5%, compared to a 7.7% increase in the prior year. Fuel gross margins also dipped $300,000 from the year previous.
On that earnings call, Marks cited successes in furthering the chain's Program Fresh foodservice initiative, but also pointed out the "amount and diversity of challenges with which the business was confronted."
His departure "is a little surprising realizing that he has been in that position for less than two years," said industry consultant David Bishop, managing partner of Balvor, Barrington, Ill. "However, it's understandable given the likely pressures he faced from the shareholders to improve financial results."
Some of those pressures included growing unemployment in The Pantry's key markets, flagging construction activity and higher fuel prices, as well as the effect of Altria's Marlboro Leadership Price (MLP) program on cigarette prices.
Benjamin Brownlow, an analyst with Morgan Keegan & Co. Inc., New York, who closely tracks The Pantry, told CSP Daily News that "it's a little disappointing" that Marks is leaving now, "given the short tenure. It seems that he put the company on the right track. I hate to see him at this point leaving only after two years of being CEO."
Sources familiar with Marks' efforts said he had a difficult job from the start, turning an acquisition-focused chain that was very efficient at "buying merchandise" to one with an eye on creating brand and making foodservice a focal point. Such an effort was problematic, given the chain's multiple formats, a workforce needing to adopt a foodservice mentality and a lackluster public perception.
Brownlow is convinced that the performance of the company as a whole or any of its initiatives did not contribute to Marks' decision to leave. Program Fresh, Marks' major initiative, was seeing positive results.
The market-by-market adoption of the program, while a considerable investment in expertise and capital, is in only a small percentage of stores and its effects have had arguably little time to bear fruit, according to sources close to The Pantry.(Click here read the January 2011 CSP magazine cover feature on The Pantry.)
"[The Pantry] said traffic improved through the end of the June quarter," Brownlow said. "That doesn't say much about the current traffic trends, but they left the June quarter on a better note going into the current quarter. But [Marks] led that initiative to begin with. He was key to implementing that."
If there was more behind Marks' departure, another indication may be a recent change in leadership, involving operations, foodservice and human resources. While Pantry officials did not return calls by press time, sources said that they seemed more like individual choices--such as Brad Williams leaving the company in June--versus symptoms of a larger problem.
But as one source put it, "if another shoe were to drop, it would be after the new CEO does his 60-day review. That's when the curtain will be pulled back."
Though Marks cited employment opportunities back in Atlanta--he had come from the executive team of Coca-Cola before joining The Pantry in 2009--he gave no word as to where he would end up. Sources said some alternatives would include returning to Coca-Cola, joining the management team at The Home Depot or even taking a job with the Atlanta Braves, a choice that would reconcile a longtime passion for baseball.
As reported yesterday in a Morgan Keegan/CSP Daily News Flash, The Pantry announced it will start an effort to find a replacement, and that Marks will stay on for up to 60 days during the transition, but nothing beyond that. If it were an internal move, senior vice president and CFO Mark Bierley, as well as others in the newly formed executive circle, are certainly on the short list. But starting a formal hunt sends the signal that one of the country's largest c-store chains intends to look both outside and within for its new leader.
Brownlow believes that recent executive turnover is not as significant as some observers are making it: "When you look at the old CEO, Pete Sodini, he was there for 10-plus years, and he was ready to retire. So I wouldn't read too much into the turnover. The key will be who they hire as his replacement."
(Click here for previous CSP Daily News coverage, including reports on other recent executive changes at The Pantry.)
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