ATLANTA -- Harry's Farmers Market here has set a new expansion program that rides on the back of Wal-Mart.
Wal-Mart Stores, Bentonville, Ark., will sponsor Harry's in a Hurry fresh foods departments in up to four discount units in a test program. The new effort will be launched for summer 1995, and will reportedly concentrate on the Georgia-South Carolina area. If the program is successful, it may be rolled out to selected Wal-Mart's in a six-state area, which will reportedly focus on the Southeast.
The Wal-Mart Harry's in a Hurry concept was adapted from Harry's two freestanding specialty convenience stores of the same name that sell fresh foods for takeout. Harry's will operate the Wal-Mart units and, according to sources, will provide Wal-Mart with a percentage of sales.
For Harry's, the five-unit retailer that earlier this year had to defer expansion plans because of financial problems, the agreement with Wal-Mart could represent a major growth move, observers said. The chain is
known industrywide for its experimentation and impressive presentation in perishables.
Wal-Mart, whose food service is marked by the presence of in-store McDonald's units, is opting for a wider food choice for shoppers, observers said. Wal-Mart's announcement apparently covered the chain's discount units. It wasn't clear if the company is considering eventually extending the concept to Its Supercenters.
Harry Blazer, president and chief executive officer of Harry's Farmers Market, said the new arrangement will represent a jump-start for expansion.
"That the leading retailer in America asked us to operate Harry's in a Hurry inside selected Wal-Mart stores only confirms the potential of the Harry's in a Hurry concept," he said. "This opportunity allows us to open additional Harry's in a Hurry units with minimal capital outlays while leveraging our existing manufacturing and distribution facilities. The alliance with Wal-Mart provides us with the immediate opportunity to take the Harry's in a Hurry concept outside Atlanta and potentially throughout the Southeast."
David A. Pattillo, executive vice president and chief financial officer of Harry's, didn't return calls seeking additional information. Wal-Mart executives also couldn't be reached.
Harry's currently operates five freestanding units in Georgia: three megastores and two Harry's in a Hurry formats. The smaller of the Harry's in a Hurry units represents about 2,500 square feet of selling space, said Lee Wilder, an analyst at Robinson Humphrey Co., Atlanta. In contrast, the Wal-Mart Harry's units will average about 1,400 square feet. The smaller size is partly attributable to the absence of a front-end (the Wal-Mart checkouts will be used) and the need for less storage space (Wal-Mart space will be employed), Wilder said. The Wal-Mart-Harry's performance will apparently be reviewed over a one-year period, Wilder said. Sales for each unit are expected to reach $1.5 to $2 million a year, the analyst added. Harry's posted sales last year of $116.7 million. "It's a low-risk way for Harry's to get into new geographic markets," Wilder said. "Wal-Mart is funding the fixturing. This also provides a vote of confidence for Harry's after some tough quarters. Wal-Mart wouldn't work with a company that was going down the tubes."
While the analyst predicted that Harry's will post a $1 million loss in the third quarter, she pointed out that Harry's has been reducing its losses ever since the fourth quarter of last year, when it lost $5 million. The new Wal-Mart program will also enable Harry's to increase capacity utilization of its production facilities.
Harry's also is preparing to open a megastore in south Atlanta in April and one in Nashville, Tenn., possibly at the end of next year, Wilder said.
