Discount stores flourish as recession habits persist

BERLIN/LONDON (Reuters) - Mid-market retailers face pressure to compete on both price and quality as they battle an expansion of On Sales chains that is powering ahead as recession-era shopping habits become entrenched in post-crisis Europe.

The enduring appeal of a bargain has been highlighted by the success of budget fashion chain Primark, and the imminent London listings of fast-growing discounter B&M and Poundland, Europe's largest single-price retailer.

"We're very good in austere times, but we're even better in good times," said Jim McCarthy, CEO of Poundland, which says nearly a quarter of its 4.5 million weekly customers now come from the more affluent part of the population.

No-frills grocers like Germany's Aldi ALDIEI.UL and Lidl LIDUK.UL, and Spanish chain Dia (DIDA.MC) are flourishing even as the consumer mood recovers in Europe, hurting the continent's top players like Tesco (TSCO.L) and Carrefour (CARR.PA).

Tesco, which has long sought to avoid a price war with the discounters in Britain, announced 200 million pounds of new price cuts on Tuesday, although analysts questioned whether that would stem a fall in market share.

Tesco's shares, which fell 4.3 percent by 1131 GMT as analysts downgraded the company after its strategy update, trade at 11 times forward earnings, a discount to Carrefour on 17 times, which started earlier to address its decline in France.

"Tesco is where Carrefour was in 2005, losing ground to distinct retailers, not addressing the problem," said Bernstein analyst Bruno Monteyne.

Dia, the world's third-largest discount grocer after privately-owned Aldi and Lidl, trades on 17.7 times forward earnings, while Primark-owner Associated British Foods (ABF.L) is on 27.9 times, compared with a fashion average of 17 times.

CUT-THROAT PRICING

In France, discounters have been losing market share since 2009 as hypermarkets have axed prices, cutting them by an average of 1.4 percent in 2013, Nielsen data shows, while discounter prices rose by an average of 0.7 percent.

Discounters in France saw a slight net fall in selling space in 2013 for the first time in 15 years and data from Kantar Worldpanel showed their market share slipped to 12.2 percent from a 2009 peak of 14.9 percent.

In a sign the cut-throat trend is set to continue, four big European supermarket chains with combined turnover of about 88 billion euros (71 billion pounds) set up a purchasing alliance this month to drive down prices from suppliers.

"Consumers are feeling better in Europe, the economic forecasts are on the uptick, but unemployment is still really high," said Chris O'Leary, head of the international division of U.S. packaged foods group General Mills (GIS.N).

He said brands no longer saw discounters as "evil" and were selling more products there: "I don't anticipate a wholesale shift back. Those formats will continue to grow, similar to the way Wal-Mart grew, or the way dollar stores are growing."

Asda, Wal-Mart's (WMT.N) British arm, has pledged to spend more than 1 billion pounds on price cuts over the next five years and has abandoned vouchers to focus more on price, arguing that shoppers are tired of complex promotional deals.

Price competition also looks set to remain fierce in fashion as Primark encroaches further on the home territory of the world's largest fashion retailer, Spain's Inditex (ITX.MC), which is responding by reworking its lowest cost brand, Lefties.

Primark, which has already opened 39 stores in Spain and plans more, expects shoppers to remain loyal even as the unemployment-plagued economy starts to recover. It has seen like-for-sales there up over 10 percent so far this year.

"Primark welcomes an improving economy. We think we'll do well in it," John Bason, finance director of Primark owner Associated British Foods, told Reuters.

PREMIUM POSITIONING

Primark's glitzy new stores are forcing rivals like H&M to invest in their own shops at the same time as cutting prices.

Aldi and Lidl have also cemented their appeal by investing in smarter stores and advertising and selling more branded and premium goods, with Aldi usurping Waitrose as Britain's "best supermarket", according to consumer group Which.

More than half of British consumers believe food sold in discount stores is of at least the same quality as that stocked in supermarkets, according to a survey by market researchers Canadean Custom Solutions.

"The image of discounters in the UK has been completely revamped. Middle and upper class consumers are going there because of their confidence in the product, not because they can't afford to go elsewhere," said Canadean's Michael Hughes.

German supermarkets, run down by decades of fierce price competition with discounters that have taken more than 40 percent of the market, have clawed back some ground in recent years by offering more quality products and upgrading stores.

But Britain's main supermarkets like Tesco and Asda have struggled to use premium quality as a differentiator from the discounters as upmarket players Waitrose JLP.UL and Marks & Spencer (MKS.L) have already cornered that part of the market.

Bernstein's Monteyne says Tesco's turnaround plan is doomed as long as it sticks to a mid-market strategy and does not try to dominate on either price or quality: "The problem if you have a 'one size fits all' model is you can't be good at anything."

Dutch grocer Ahold (AHLN.AS) has had more success by offering better fresh food and more deli products at its Stop&Shop and Giant chains in the United States, helping it keep growing despite the rapid expansion of Wal-Mart.

That echoes the strategy adopted by Hennes & Mauritz (HMb.ST), the world's second-biggest clothing retailer that has expanded limited-edition designer collections and moved into sportswear to defend shrinking profit margins as Primark expands.

A survey conducted by Societe Generale showed H&M has raised prices of its premium wares in the last two years, even as it continues to trim prices of basics.

(Additional reporting by Dominique Vidalon in Paris, Martinne Geller in Boca Raton and Philip Blenkinsop in Brussels; editing by Tom Pfeiffer)

Pride & joy: Waverly Twp. man's Penn State football collection represents 40 years worth of memories

Like countless other Scranton area residents, Ken Gentilezza, M.D., lives for Penn State football. But it's fair to say the Waverly Twp. resident has taken his fandom to the next level.

He never misses a home game at Beaver Stadium and has attended dozens of away games and postseason bowls.

Every year, he and his wife, Susan, give a partial scholarship to a deserving member of the Nittany Lions.

When he became dissatisfied with the quality of the PSU clothing sold in State College's many stores, he simply started producing his own custom line through local wholesaler Kevin's.

And then there's the spacious finished basement of his home, a veritable shrine to Nittany Nation.

Just about every square inch of wall space in Dr. Gentilezza's man cave is dedicated to his four decades-long devotion to Penn State. He's never done an official count, but there's easily several hundred items, from signed helmets, jerseys and footballs to blown-up photos to a hand-written note by Penn State's former coach, the late Joe Paterno.

The leather couches he and guests sit on to watch Penn State away games are Nittany blue. So is his bar. Even the bathroom is decked out in full PSU-themed splendor.

Besides Mr. Paterno, many of Penn State's all-time greats make appearances throughout, including Scranton's own Mike Munchak, Eric Shrive and Matt McGloin. Former coach Bill O'Brien, who recently left the Lions to coach the NFL's Houston Texans, has a more modest bit of space dedicated to his brief yet effective tenure.

Dr. Gentilezza views the collection, and Penn State football in general, as a full-blown hobby. He derives the same pleasure from it that other guys do from hunting or fishing.

"This," said Mrs. Gentilezza as she surveyed the fruits of her husband's labors on a recent afternoon, "is definitely his passion."

"It just gives me a great feeling," said Dr. Gentilezza, the managing partner at Northeastern Rehabilitation Associates, P.C.

Dr. Gentilezza, 55, first started decorating the basement around 1996, about four years after he and his wife built the house.

By then, he had been a Penn State diehard for over 20 years. It started, he said, when his father, the late Angelo Gentilezza, took him to a game at Beaver Stadium during the early 1970s. At the time, Heisman Trophy-winning running back John Cappelletti was the Lions' biggest star.

"We lost to Navy in the rain," said Dr. Gentilezza, a West Scranton native. "But it didn't dampen my spirits. I caught the bug."

He ended up getting his bachelor's degree in biology from Penn State, and continued to faithfully follow the Nittany Lions during his medical studies.

For one of his first dates with Mrs. Gentilezza, he took her to the 1985 Penn State-Notre Dame game at Beaver Stadium. They ended up having to wear garbage bags to protect them from the horrible weather.

"I said to myself, 'Who is this guy?'" Mrs. Gentilezza joked.

"Our first two years of being together, Penn State only had one loss. So, she had no real idea what I was like after a loss," Dr. Gentilezza said with a laugh.

Eventually, Mrs. Gentilezza was fully assimilated into Nittany Nation. The couple became season-ticket holders, and during the early 1990s they started attending bowl games, where interactions between fans and the team are more commonplace, resulting in greater autograph opportunities, Dr. Gentilezza said.

It was then that his collection began to grow, and grow, and grow some more.

Today, the setup has a museum-esque sophistication to it, curated into specific sections and themes. Dr. Gentilezza often takes older stuff down and replaces it with newer additions.

The oldest artifact is a 1933 Penn State pennant that sits in a glass display case that also includes a football from the 1994 Rose Bowl, in which Penn State clobbered the Oregon Ducks to put the capper on a perfect 12-0 season.

The oddest piece might be the helmet Dr. Gentilezza won as a door prize at a luncheon held before the 2005 Orange Bowl. Half of it is Nittany Lion white and navy, while the other half is the red and gold of the Florida State Seminoles.

The Lions triumphed in that game and were led to a 12-1 record that season by quarterback Michael Robinson, whose official Big 10 jersey hangs in a full-size wood locker Dr. Gentilezza installed next to the bar. It looks exactly like the real deal, right down to the shoulder pads Dr. Gentilezza put in it.

Other jerseys sit on the wall behind glass. They include the numbers of some of Penn State's finest linebackers, among them Paul Posluszny, Shane Conlan and Jack Ham, who went on to become one of the anchors of the Pittsburgh Steelers' four-time Super Bowl-winning defense.

All of those jerseys are white, with the exception of Mr. Ham's, who gets sole navy blue treatment "because he was fierce," Dr. Gentilezza said.

Some objects hold a special sentimental value for Dr. Gentilezza. His late mother, Carmella Gentilezza, collected bells, so there's a PSU bell on display in her honor. Situated near that is an old Citrus Bowl baseball cap Dr. Gentilezza's father started wearing a few years before getting to attend the actual bowl, a PSU win over the Tennessee Volunteers. A few months later, he passed away.

"That was a great trip. So that hat is a reminder of it," Dr. Gentilezza said.

A good deal of wall space is devoted to enlarged photos of iconic on-field moments, like the Sports Illustrated cover showing Penn State receiver Gregg Garrity after his last-minute catch against the Georgia Bulldogs in the 1982 Sugar Bowl, and Don Graham's jubilant pose following the Lions upset of the Miami Hurricanes in the 1986 Fiesta Bowl. Both wins earned Penn State the National Championship.

Dr. Gentilezza purchases the photos from newspapers, magazines and Internet dealers. Many were in frames at one time, but he recently started converting them into painting-like canvas wrap.

"The frames are good, but I think this has a nicer appearance," he said.

Other photos show him, family members and friends at games and other team-related functions. In one, the Gentilezzas are partying with a shaggy, gray-haired USC fan before the 2008 Rose Bowl. The guy was none other than the father of Rivers Cuomo, frontman of the popular band Weezer.

Not long ago, Dr. Gentilezza converted daughter Olivia's old playroom into a pictorial documenting the 2012 season, when the Lions managed to post an impressive 8-4 record despite crippling NCAA sanctions in the wake of the Jerry Sandusky scandal season 1. He has a picture with the signatures of every senior member of that team.

"That 2012 year was so special. I honestly believe those young men saved the program," he said. "It was probably my favorite year following Penn State football."

Of course, Mr. McGloin, now a quarterback with the NFL's Oakland Raiders, was a huge part of the team's success. Dr. Gentilezza has become close with him, as well as Mr. Shrive, an offensive lineman who just graduated from Penn State, and both of their families.

One of Dr. Gentilezza's favorite photos is a candid shot of Mr. McGloin and Mr. Shrive standing not far from each other in a throng of PSU players. Also in his possession is the first helmet the two ever signed.

"Matt didn't even have a number yet," said Dr. Gentilezza as Mr. McGloin's No. 11 jersey loomed a few feet away, part of another section dedicated to 2012. "Matt, really to me, you can say what you want about Bill O'Brien, but I think Matt made Bill O'Brien as much as Bill O'Brien made him."

Like Mr. McGloin, Mr. Paterno has his own dedicated section of the basement. Dr. Gentilezza had the chance to chat extensively with the coaching icon on a few occasions. During one such encounter, Mr. Paterno signed a football for Dr. Gentilezza.

"You can see I was a rookie back then, because I didn't know about white-paneled footballs," said Dr. Gentilezza with a laugh as he pointed at the brown regulation football etched with Mr. Paterno's scrawl.

Dr. Gentilezza's daughter also had a couple of successful encounters with Coach Paterno. At a luncheon before the 2002 Capital One Bowl, Olivia ran behind the dais and had Mr. Paterno sign her American Girl autograph book. Following a big PSU win at Northwestern during the '05 season, Mr. Paterno signed a hat for her as he walked to the team bus.

As Dr. Gentilezza walks through the basement, beaming from ear to ear while recounting the stories behind each piece, it's clear that the collection is as much a time capsule as it is a showpiece. All the great times he's had through the years because of Penn State football come rushing back in an instant.

"It's a lot of good memories," he said. "That's what it is. Memories."

Contact the writer: jmcauliffe@timesshamrock.com, @jmcauliffeTT on Twitter

Age: 55

Residence: A native of West Scranton, he now lives in Waverly Twp.

Family: Wife, Susan; daughter, Olivia

Professional: He is the managing partner at Northeastern Rehabilitation Associates, P.C. Also, he is the attending physician at the Allied-Moses Taylor Inpatient Rehabilitation Unit.

Objects of his affection: A longtime collector of Penn State football memorabilia, his massive collection decorates several rooms of his basement. It includes signed helmets, footballs and jerseys; enlarged photographs; a full-scale wood locker; newspaper and magazine clippings; pennants; hand-written letters, etc. Penn State players and coaches featured in the collection include Joe Paterno, Matt McGloin, Mike Munchak, Eric Shrive, Bill O'Brien, Curt Warner, Ki-Jana Carter, Shane Conlan, Michael Robinson, Jack Ham, Paul Posluszny, Tom Bradley and many others. Go online to see Dr. Ken Gentilezza's Penn State memorabilia collection.

One of the stand-out objects in Dr. Ken Gentilezza's Penn State memorabilia collection has to be the above hand-written letter the late Joe Paterno sent him in June 2009.

Mr. Paterno had visited the Scranton area a few weeks earlier. During that visit, Dr. Gentilezza not only had the chance to chauffeur the legendary coach but also had a good, long conversation with him.

In addition, Dr. Gentilezza gave Mr. Paterno several Penn State football sweatshirts and pullovers that he designs through local clothing wholesaler Kevin's.

Mr. Paterno happily accepted the gifts, and a few weeks later he sent Dr. Gentilezza this note, written on official Penn State football stationery, to inform him that he had worn one of the tops to the office that morning on account of the "cooler" weather.

"They are great," Mr. Paterno wrote, before adding, "I enjoyed my visit to Scranton - I always do - because of the great people of N.E. PA."