Is Publix Staff Overstocked?

Aug. 31–Lately, the owners of Publix stock must be thrilled about their investment. Shares have soared more than 70 percent in two years, earning many people thousands of dollars.

Stockholders at Publix Super Markets Inc. are in an exclusive club. Shares are not sold publicly, and only employees and board members may purchase the privately held company’s stock.

But as employees horde Publix shares, it raises a question: Do they have too much of a good thing?

Publix’s 401(k) retirement plan is nearly 75 percent loaded with Publix stock. This contrasts with a move among corporations to diversify their retirement plans, particularly since the collapse of Enron Corp. in 2001, when scores of Enron employees lost their retirement savings.

Some Publix stockholders say there is no better investment than shares of the 75-year-old Lakeland-based grocery chain. Nonetheless, financial advisers can’t fathom putting so much of one’s nest egg in any company, no matter how successful.

“If something should go wrong with the company, you’re going to be double hit,” said Rick Meigs, a retirement plan consultant from Portland, Ore., who runs the 401khelpcenter.com Web site. “One, you’re probably going to be out of a job. And second, your stock is going to be clobbered.”

Publix employees feel immense pride in owning shares of the grocery chain, said Joe Carvin, a former vice president of human resources at Publix and a stockholder.

The company has grown to more than 860 stores in the South and has more than 130,000 employees. Its sales may approach or hit $20 billion this year.

Employees snap up the stock whenever they can, said Carvin, who has written a book about Publix called “A Piece of the Pie — The Story of Customer Service at Publix.”

“I’ve had people ask me how they can buy stock in Publix. When I explain that they can’t, I can see the look of disappointment in their eyes,” Carvin writes.

Since August 2003, Publix employees and retirees have had reason to be more optimistic than usual. During that time, its stock has risen to $72.75 from $42.25, an increase of 72 percent. Most other U.S. supermarket companies haven’t seen nearly that kind of appreciation.

Shares of Delhaize Group, owner of the Tampa-based Kash n’ Karry chain, have risen 50 percent in the past two years. However, shares of Kroger Co., the nation’s biggest grocer, are up only 1.5 percent.

Shares of Albertson’s are down 3 percent, and shares of California-based Safeway Inc. are down 5.7 percent.

One caveat: Because of the unusual way Publix stock is valued, it may not be as vulnerable to the same ups and downs as publicly traded corporations. As a private company, Publix’s stock price is assigned a value every quarter by St. Petersburg-based Raymond James Financial.

“I would have to think they’re pretty happy,” Jim Brunson, a former Publix purchasing agent, said of his fellow stockholders. “I mean, the two or three people that I see all the time that have it are pretty happy.”

Employees have loaded up their 401(k) plans with Publix stock, almost avoiding the other 10 investment funds in the company’s retirement plan. According to U.S. Securities and Exchange Commission documents, the total value of Publix stock in the company’s 401(k) plan was about $520 million on Dec. 31, or about 71 percent of the plan’s assets. Since Dec. 31, the value of Publix stock in the 401(k) plan has risen to 74.5 percent of its assets, spokeswoman Maria Brous said. (In addition, Publix employees can buy company stock independent of the 401(k) plan.)

That bucks the diversification trend. Nationwide, 20 percent of the assets in corporations’ 401(k) plans is employer stock, according to a survey by Hewitt Associates, a human resources services firm based near Chicago. That is down from 30 percent in 2001, according to the survey of 457 companies.

Two certified financial planners from the Tampa Bay area said they would never advise people to put that much of their retirement assets in any company’s stock. Carl von dem Bussche, of Financial Guidance Group of Palm Harbor, said he prefers that clients have no more than 20 percent of their retirement assets in any single company’s stock.

“It really amazes me that the employees would put all their “eggs in one basket,’ even if Publix is an outstanding company, which it is,” von dem Bussche said in an e-mail. “One major risk for Publix would be product liability. For example, tainted food, lawsuits from discrimination or other unforeseen events … [could] crash the stock price.”

Michael Valdez, of Triangulum Financial Partners of Tampa, also said it would be unwise to load up too much in any company’s stock, even Publix’s. However, he said many Publix employees and retirees may have retirement assets beyond their Publix stock, so they may not be as at-risk as it appears.

For its part, Publix lets employees know that they have 10 other investment funds to put their retirement money into, Publix’s Brous said. So far, though, employees keep choosing the fund containing Publix stock. Also, because Publix’s stock price keeps rising, Publix stock makes up a bigger percentage of the retirement plan’s assets, she said.

Brunson, the former Publix purchasing executive, said he has heard all the warnings about being too heavily invested in any company. But even after diversifying his investments after retiring, Publix stock still makes up 50 percent.

“I agree with them [the financial advisers], but at the same time, that’s what almost everybody at Publix does — keep the stock there,” Brunson said. “I think there’s only been three times in history when it’s gone down.”

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