Ralphs Riverside Closing Nov. 11, Stater Bros. to replace

[architect]

I have to echo your posit on Aldi and Smart/Final.

My empirical experiences, coupled with ongoing conversations with management, support your observations.

Exactly. Some of the stores being closed have been remodeled in the last three to five years. So clearly the thinking three to five years ago was that these stores would be kept open.

So what has changed during that time period? The ethnic make-up has not changed. The increase in Latino and Asian populations has been going on for years. The opening of new Asian and Latino markets has actually slowed down a little compared to ten years ago. The only thing different is this explosion of low-coast entrants which is what makes me think that is more likely the cause for Ralphs' change in strategy.

I'm not going to go off on a tangent regarding unions and my opinion of them, but a company just can't retreat when it smells competition, that's incredibly bad business decisions. The wide swath of destruction from Walmart has been from companies who largely could not or did not conform to the future. We all know that a handful of nice, profitable stores is not going to carry a division or a company in the long run.

Honestly, I doubt that union issues are the primary reasons behind Ralph's store closures in recent years. Although the unions certain make running these stores more difficult for Kroger, the company is unionized as a whole, so this is nothing out of the ordinary for them. Likely, the largest impact has simply been the growth of low-cost entrants which have eaten into sales at stores which are in middle to lower class areas. Moving forward, I expect that Ralphs will become primarily centered in upper middle class and high-end area, with the low hanging fruit either converted to the Food 4 Less banner or closed entirely. Operational costs in SoCal (especially through taxes, higher wages and land values) are simply too high to maintain stores which are performing at a mediocre level, unlike many other areas of the country in which Kroger can maintain lower-performing stores by simply reducing staffing and minimizing capital investment.

[klkla]

I'm not going to go off on a tangent regarding unions and my opinion of them, but a company just can't retreat when it smells competition, that's incredibly bad business decisions. The wide swath of destruction from Walmart has been from companies who largely could not or did not conform to the future. We all know that a handful of nice, profitable stores is not going to carry a division or a company in the long run.

The difference in this situation can be summed up in three words: Barriers to entry.

WalMart has only expanded in areas where real estate and labor costs are cheap.

Ralphs core group of stores is not a 'handful' but closer to 150 or so stores and generate sales of around $5 Billion annually. But, more importantly, they generate much higher margins and provide a lot of cash flow to Kroger.

It could be argued that it would be an incredibly bad business decision to invest money into stores that just are not going to provide a reasonable return on investment. There's no way that Ralphs can get their costs down to the level of the new entrants or the non-union discount & ethnic chains.

Another thing to keep in mind is that even if Walmart could find locations to compete with Ralphs in areas where there are barriers to entry Ralphs would kill them because customers in those areas are looking for gourmet foods and healthy foods. They are willing to pay more for better products.

[arizonaguy]

I'm not going to go off on a tangent regarding unions and my opinion of them, but a company just can't retreat when it smells competition, that's incredibly bad business decisions. The wide swath of destruction from Walmart has been from companies who largely could not or did not conform to the future. We all know that a handful of nice, profitable stores is not going to carry a division or a company in the long run.

The difference in this situation can be summed up in three words: Barriers to entry.

WalMart has only expanded in areas where real estate and labor costs are cheap.

Ralphs core group of stores is not a 'handful' but closer to 150 or so stores and generate sales of around $5 Billion annually. But, more importantly, they generate much higher margins and provide a lot of cash flow to Kroger.

It could be argued that it would be an incredibly bad business decision to invest money into stores that just are not going to provide a reasonable return on investment. There's no way that Ralphs can get their costs down to the level of the new entrants or the non-union discount & ethnic chains.

Another thing to keep in mind is that even if Walmart could find locations to compete with Ralphs in areas where there are barriers to entry Ralphs would kill them because customers in those areas are looking for gourmet foods and healthy foods. They are willing to pay more for better products.

With these closures Ralphs only has about 180 - 190 or so stores. So, they've almost whittled it down to the 150 or so "core" stores. This is in contrast to other Kroger divisions which seem more focused on market share and will keep marginal stores open to prevent competition.

[pseudo3d]

I'm not going to go off on a tangent regarding unions and my opinion of them, but a company just can't retreat when it smells competition, that's incredibly bad business decisions. The wide swath of destruction from Walmart has been from companies who largely could not or did not conform to the future. We all know that a handful of nice, profitable stores is not going to carry a division or a company in the long run.

The difference in this situation can be summed up in three words: Barriers to entry.

WalMart has only expanded in areas where real estate and labor costs are cheap.

Ralphs core group of stores is not a 'handful' but closer to 150 or so stores and generate sales of around $5 Billion annually. But, more importantly, they generate much higher margins and provide a lot of cash flow to Kroger.

It could be argued that it would be an incredibly bad business decision to invest money into stores that just are not going to provide a reasonable return on investment. There's no way that Ralphs can get their costs down to the level of the new entrants or the non-union discount & ethnic chains.

Another thing to keep in mind is that even if Walmart could find locations to compete with Ralphs in areas where there are barriers to entry Ralphs would kill them because customers in those areas are looking for gourmet foods and healthy foods. They are willing to pay more for better products.

With these closures Ralphs only has about 180 - 190 or so stores. So, they've almost whittled it down to the 150 or so "core" stores. This is in contrast to other Kroger divisions which seem more focused on market share and will keep marginal stores open to prevent competition.

I actually don't know a whole lot of Kroger divisions that do that. I know that Kroger maintains a high concentration of stores in northwest Houston that they managed to build via Signature replacements or Albertsons purchases, but most of their store base seem to be fairly profitable where they are (decent enough 'hoods) and the rough areas where they keep old stores open is because there's no other competition, not to keep others out (if ALDI moved in on those locations I'm thinking of, then Kroger will probably close down, but they've still got a big enough base that their market share will not suffer).

Perhaps Ralphs is not "running away from competition" but rather making strategic business decisions. I would understand if these were marginal stores riding out their leases, but from what it sounds like, at least this store, they've made the decision to sell their store to Stater Bros., which is a standard move for grocers leaving a market (or sub-market).

[klkla]

I would understand if these were marginal stores riding out their leases, but from what it sounds like, at least this store, they've made the decision to sell their store to Stater Bros., which is a standard move for grocers leaving a market (or sub-market).

The Inland Empire (Riverside and San Bernardino counties) could definitely be considered a sub-market. It's a totally different world from L.A./O.C. in so many ways. Ralphs, Vons and Albertsons have been closing stores for years in the IE. Between the three of them they probably have 20-25 stores left (Not including the Palm Springs area which is another sub-market within Riverside County).

[CalItalian]

The difference in this situation can be summed up in three words: Barriers to entry.

WalMart has only expanded in areas where real estate and labor costs are cheap.

Ralphs core group of stores is not a 'handful' but closer to 150 or so stores and generate sales of around $5 Billion annually. But, more importantly, they generate much higher margins and provide a lot of cash flow to Kroger.

It could be argued that it would be an incredibly bad business decision to invest money into stores that just are not going to provide a reasonable return on investment. There's no way that Ralphs can get their costs down to the level of the new entrants or the non-union discount & ethnic chains.

Another thing to keep in mind is that even if Walmart could find locations to compete with Ralphs in areas where there are barriers to entry Ralphs would kill them because customers in those areas are looking for gourmet foods and healthy foods. They are willing to pay more for better products.

With these closures Ralphs only has about 180 - 190 or so stores. So, they've almost whittled it down to the 150 or so "core" stores. This is in contrast to other Kroger divisions which seem more focused on market share and will keep marginal stores open to prevent competition.

I actually don't know a whole lot of Kroger divisions that do that. I know that Kroger maintains a high concentration of stores in northwest Houston that they managed to build via Signature replacements or Albertsons purchases, but most of their store base seem to be fairly profitable where they are (decent enough 'hoods) and the rough areas where they keep old stores open is because there's no other competition, not to keep others out (if ALDI moved in on those locations I'm thinking of, then Kroger will probably close down, but they've still got a big enough base that their market share will not suffer).

Perhaps Ralphs is not "running away from competition" but rather making strategic business decisions. I would understand if these were marginal stores riding out their leases, but from what it sounds like, at least this store, they've made the decision to sell their store to Stater Bros., which is a standard move for grocers leaving a market (or sub-market).

Aldi is NOTHING in Southern California. They are no threat to anybody (less of a threat than Fresh & Easy was). They are a joke especially their product mix for this market. In Inglewood, there is an Aldi LITERALLY next door to a Food 4 Less and a 99 Cents Only! store on the other end of the Food 4 Less shopping center. Aldi has no business at all (I was there today...5 customers at 4 pm...and this isn't the first time I've seen this) while the other two are bustling with activity (customers).

[veteran+]

I would understand if these were marginal stores riding out their leases, but from what it sounds like, at least this store, they've made the decision to sell their store to Stater Bros., which is a standard move for grocers leaving a market (or sub-market).

The Inland Empire (Riverside and San Bernardino counties) could definitely be considered a sub-market. It's a totally different world from L.A./O.C. in so many ways. Ralphs, Vons and Albertsons have been closing stores for years in the IE. Between the three of them they probably have 20-25 stores left (Not including the Palm Springs area which is another sub-market within Riverside County).

San Bernadino & Riverside counties are indeed submarkets for Ralphs. Both Vons/Pavilions and Ralphs reduced their store count significantly and aspiring employees were told they would have to go to L.A., O.C. and San Diego for career opportunities.

I myself closed several Vons and Ralphs in the Coachella Valley (more Vons for sure).

Also, the Coachella Valley stores are significantly below average volume in comparison to coastal stores.

[storewanderer]

Ralphs 2 remaining stores in San Bernardino (maybe one is in the next town over) are pretty rough; last remodeled in the late 90's, no self checkout, and appear to not do too well. I would be surprised to see those continue much longer. Also they had no pharmacy as I recall (Rite Aid and/or CVS operated in the same shopping centers).

This may be another issue with Ralphs: many do not have a pharmacy. It is just another missing potential revenue center (depending on the circumstances) that is usually present in other divisions but not so much at Ralphs. I have never seen a Smiths before without a pharmacy. I believe in many cases lease restrictions prevent Ralphs from having a pharmacy and they do have it in as many stores as possible. In NorCal when Ralphs bought divested Albertsons in 1999 the first thing they did was build in pharmacies into every store where they could (which was quite a few) as Albertsons had in the early 1990's eliminated pharmacy from its NorCal Stores (why?).

[CalItalian]

Stater Bros. opens September 27th, 2017.
http://www.pe.com/2017/09/13/new-stater ... n-sept-27/

[CalItalian]

Grand opening pictures. Quite a crowd.
http://www.pe.com/2017/09/27/why-new-ri ... he-future/