When Tops Markets confirmed it would file for Chapter 11 bankruptcy protection Wednesday morning, it assured customers stores would stay open "with no impact to day-to-day operations."
While shoppers may not see immediate or drastic changes, Tops said it would review its weakest-performing stores and that a couple could be on the block for closure. Other factors, such as out-of-stocks or decreased selection, may end up beyond the company's control if suppliers and vendors decide to tighten up their shipments or stop sending shipments altogether.
Inventory and selection
Even before Tops confirmed the news, Chef 's made the decision to stop filling the grocer's orders of pasta sauce Tuesday.
"They owe us quite a bit of money so we're worried about that and we're obviously not going to ship them any more product," said Lou Billittier Jr., owner of the Seneca Street restaurant, which sells four flavors of its sauce at Tops and other grocery stores.
Billittier said Chef's used to do 75 percent of its business through Tops. Today, it does 75 percent of its business through Wegmans.
"They may tell us they won't carry us in the future and that's fine with me," Billittier said. "I'd rather lose their business and make it up somewhere else."
When asked if customers could remain confident that they would find its eggs in Tops coolers in the same capacity as before, Kreher Family Farms said it would withhold comment until more details were available. Kreher's is listed as one of Tops' biggest creditors, owed $875,565 in trade debt.
But Tops shoppers should have no problem finding Weber's mustard on Tops shelves throughout the bankruptcy proceedings, according to Steven Desmond, president of Heintz & Weber, the nearly century-old Reading Avenue company that makes the Western New York favorite.
The company has had a long and beneficial relationship with Tops Markets. With the grocer's deep market share, it relies on the company for nearly a third of its sales. But after speaking with the company, Desmond said he feels confident going forward with the grocer and delivering product on credit—just maybe not so much of it.
"We are taking the stand that we will continue as 'business as usual' with Tops, just being a bit more cautious from order to order," Desmond said.
Tops said it expects to receive the court's permission to continue to pay vendors and suppliers in full for goods and services delivered after Wednesday's filing. And federal statutes provide certain payment protections for produce companies that sell raw, unprocessed fruits and vegetables to grocers in bankruptcy. Bankruptcy provisions usually allow companies to pay critical vendors. But when a grocer files chapter 11, the companies that supply it with everything from cantaloupe to cat food must decide how much credit they are willing to risk extending to a company in that kind of financial situation, even if their risk is minimized.
"People were starting to make these decisions even when there were just rumors of a bankruptcy," said Raymond Fink, a partner with Lippes, Mathias, Wexler, Friedman and co- chair of its bankruptcy practice group. "The decisions come down to a lot of different factors. There's no black and white rule book."
Tops said it expects to receive the court's permission to continue to pay employee wages and benefits in full after the filing, and said the filing would not affect any of its more than 14,000 employees.
Indeed, trimming labor would be the worst move it could make, according to Burt Flickinger III, a retail expert and managing partner of New York City research firm Strategic Resource Group.
Tops is already operating with a "skeleton staff," Flickinger said, and it is hurting sales as well as customer satisfaction levels.
Grocers tends to recoup an average of $140 in sales for every hour an employee works. But for every additional employee that is added to the floor, sales generation climbs to $200 to $300 per hour, Flickinger said.
"Tops originally cut staffing to cut fat, now it's cutting muscle, into the bone and now is cutting marrow out of the body of the business," Flickinger said.
Tops has said it will keep stores open, and take a hard look at just a small number of its worst performing ones. That's a good move and one customers can likely count on, according to Flickinger.
He said Tops' best way forward would be to continue adding fueling stations to its portfolio. That has been the company's strategy, and has resulted in record-breaking gas sales and profits, and has helped increase its store sales. Flickinger also suggested Tops would do better to move away from the Orchard Fresh concept in Orchard Park and redirect its investments to existing stores in the North Country, Western New York and Vermont.
"They need to spend on the winners and not on the losers," Flickinger said.