Harps ESOP Pays Off $20M in Debt

Since launching an employee stock option plan in August 2001, Harps Food Stores has paid back $20 million in debt, said Roger Collins, president and CEO of the Springdale-based chain of 46 supermarkets.r

Harps borrowed an undisclosed amount of money from a group of lenders headed by Bank of America. That money was used to purchase stock from Gerald Harp and other investors. Harps has 15 years to repay the debt. Harp, the former president and CEO, retired at the time of the ESOP offering, and Collins became president of Harps a year earlier.r

Collins said Harps will put about 8.5 percent of each employee’s pay this year into the ESOP. Next year, the company will likely have a 10 percent match going to the employees’ stock.r

The company’s stock was valued at $27.90 per share when the ESOP began in August 2001. A year later, the price had jumped 56 percent to $43.60. The stock price won’t be evaluated again until December. r

Harps is a privately held company, so an outside auditor, Houlihan Lokey & Zukin Financial Advisers Inc., was hired to evaluate the stock price by comparing Harps’ performance to that of other grocery store chains.r

Collins said he believes the ESOP builds loyalty through ownership.r

“Our goal is to have a grocery store where the checker and the stocker are thinking like owners,” he said.r

Collins said Harps sales increased by 5 percent in the fiscal year that ended in August, but he wouldn’t reveal the dollar figures.r

Collins said Harps will buy back stock from employees who leave the company.r

Collins said Harps has weathered Wal-Mart’s foray into the grocery business by putting quality first. Wal-Mart launched its grocery business with Supercenters and Neighborhood Market stores, many of which opened across the street from Harps stores in Northwest Arkansas.r

“For the first time in 11 years, we didn’t have a Wal-Mart Neighborhood Market or Supercenter open in one of our markets in the last 12 months,” Collins said. “Anytime a grocery store moves in across the street, it hurts you … We’ve already been through that and faced that battle, and I feel like we can be successful.”r

Collins said Harps competes against Wal-Mart by offering “the highest quality perishables a person could buy.”r

“We had to do a tremendous amount of work to figure out how we fit in and what our customers want,” he said. “We’ve just tried to focus on what [Wal-Mart] is doing and tell people how we differ. The ‘no solution added’ campaign is an example of that.”r

Collins is referring to an advertising campaign in which Harps markets its meat products as containing no added solution. Labels on meat at Wal-Mart list a particular percentage of “solution” as an ingredient without explaining what that solution is.r

Harps was founded by Harvard and Floy Harp in Springdale in 1930. Collins, a native of Texas, went to work for the company in 1986 as vice president of finance.r

Harps has grocery stores in Arkansas, Oklahoma and Missouri under the name Harps or Price Cutters. The company opened new stores last year in Green Forest, Huntsville and Alma.r