CARY, N.C. -- "Needless to say, shareholders don't launch a proxy content without having a strategy in place."
That's the message from John Glenn Grau, president of InvestorCom Inc., who is serving as investor contact for a dissident group of shareholders aiming to place three candidates on The Pantry's board of directors.
Speaking in an exclusive interview with CSP Daily News on behalf of the group called Concerned Pantry Shareholders (CPS), which represents approximately 2% of total shares at the publicly traded convenience store chain, Grau said the shareholders are prepared to take their fight to the company's 2014 annual meeting of stockholders slated for next month.
"Our primary issues are more at the board level … that we need a qualified board to direct management," he said.
As Grau was describing ongoing challenges at the 1,500-plus Southeastern c-store chain, The Pantry management late last week filed an amended 10-K/A to the U.S. Securities & Exchange Commission (SEC). In it, the company delivered an executive performance summary that affirms findings reportedly exclusively by CSP Daily News last week that the company's fuel sales continue to slide and in-store transactions are up slightly. Specifically:
- Comparable store merchandise revenue increased 0.9% and increased 3%, excluding cigarettes.
- Fuel gross profit was $199.3 million, compared to $210.3 million a year ago. Retail fuel margin per gallon was flat at $0.115. Compared to the prior year, comparable-store fuel gallons sold declined 4.8%.
- Adjusted EBITDA was $202.4 million, down from $210.1 million a year ago.
"While our financial results did not meet our expectations, we continued to make investments to support our future growth," management stated in the SEC filing. "We remodeled 72 stores to provide new product offerings and a better shopping experience. We rebuilt three stores and opened four new stores. We continued to expand our quick-service restaurant business with 15 store openings. While it is still early, overall we are pleased with the results of these investments."
The company also noted it has bolstered the leadership front, citing the hires of B. Clyde Preslar as CFO, P. Joseph Venezia, as senior vice president of operations, and Boris Zelmanovich as chief merchandising officer.
Critics at The Pantry, however, tell CSP Daily News, that the leadership has failed to hire someone within the convenience channel to an executive position. Grocery industry veteran Dennis Hatchell was named president and CEO of The Pantry effective March 2012. He succeeded Edwin Holman, who had served as interim CEO since Terrance Marks resigned as CEO effective in Oct. 2011. Holman remained in his position as chairman. Hatchell previously served as vice chairman of Alex Lee Inc., Hickory, N.C., a holding company for Lowe's Food Stores Inc., Merchants Distributors Inc. and Institution Food House.
Board Battles
Meanwhile, as The Pantry faces increased competition from Sheetz, RaceTrac, Mapco and Wawa, among others, the dissident group is targeting an aging board of directors. CPS has nominated three candidates:
- Todd Diener, former executive office at Brinker International Inc, where he most recently was president of Chili's Grill & Bar.
- James Pappas, managing member of JCP Investment Management LLC and current Board Chairman of Morgan's Foods that is aligned to KFC, Taco Bell and Pizza Hut Express.
- Joshua Schechter, director of Alderans Co., which is tied to a hair-related business.
To date, The Pantry's board is composed of 10 members, all of whom, with the exception of William Finnegan, are in their 60s or 70s.
The board consists of:
- Edwin J. Holman, 67, 2005 Chairman of the Board.
- Robert F. Bernstock, 63, 2005 Director.
- Paul L. Brunswick, 74, 2003 Director.
- Wilfred A. Finnegan, 55, 2006 Director.
- Kathleen Guion, 62, 2013 Director.
- Dennis G. Hatchell, 64, 2012 Director.
- Terry L. McElroy, 65, 2006 Director.
- Mark D. Miles, 60, 2006 Director.
- Bryan E. Monkhouse, 69, 2004 Director
- Thomas M. Murnane, 66, 2002 Director.
CSP Daily News has confirmed that at least two directors, including Brunswick, plan to step down.
"We don't know what The Pantry is planning to do in regards to openings on the board," Grau said. "We don't know if The Pantry is going to fill the two openings, fill one or consider something else. At the moment, however, we are comfortable presenting three members to serve on the [new] board."
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