Albertsons losses continue, comp sales fall

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storewanderer
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Albertsons losses continue, comp sales fall

Post by storewanderer »

http://www.supermarketnews.com/retail-f ... egative-3q

Not good news for their IPO plans. They have a long painful process to go to get their prices in line throughout their stores.

NorCal finally bit the bullet the past week or two, and decided to match the value brand 1 gallon milk and large 1 dozen egg prices of Raleys and Save Mart. I guess they got tired of being $1+ higher than Raleys and Save Mart on milk and eggs. Too bad their service levels are still far below those of Raleys and Save Mart; few cashiers, long slow moving checkout lines.
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Re: Albertsons losses continue, comp sales fall

Post by klkla »

In the article Albertson's said:

“Despite deflationary trends, we have achieved identical store sales growth on an overall basis and have been able to maintain or increase our share in the food retail channel during the first three quarters of fiscal 2016,” Albertsons said in the filing. “While we anticipate deflationary trends in certain commodities to continue through the end of fiscal 2016 and into fiscal 2017, we plan to maintain our price competitiveness in order to drive customer traffic.”

Then the article says:

For the quarter, which ended Dec. 3, identical store sales at Albertsons stores declined by 2.1% while Safeway stores experienced a 2.2% comp decline.

How can you achieve 'identical store sales growth on an overall basis' when your identical sales are negative?
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Re: Albertsons losses continue, comp sales fall

Post by rwsandiego »

klkla wrote:...How can you achieve 'identical store sales growth on an overall basis' when your identical sales are negative?
Kool-aid in aisle 9?
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Re: Albertsons losses continue, comp sales fall

Post by pseudo3d »

I'm not convinced ABS is in danger of massive 2002-2006 closures but they need to figure out a way to cut losses without closing stores, because nothing* undermines faith faster in a supermarket company faster than division closures. Honestly, at this point, they need to get rid of the Houston division's distribution center, the stores are clustered in three markets with almost nothing in between (maybe only about 70 stores), and outsource it. If they're doing the "Safeway merchandise mix" in Texas and Louisiana, then there's no reason to keep the Ponca City OK non-foods/HBA DC at all (in fact, I wouldn't be too surprised to see that gone soon) either.

Meanwhile, at this rate, Price Chopper isn't worth pursuing if ABS is still bleeding money. If Price Chopper is having some problems staying afloat, that's up for them to make their decisions, in the meantime drop it (they might be in the mood to sell off a few stores it has on the perimeter to ACME). They need to make some significant decisions NOW because time is running out to make those decisions without taking some massive hits.


* barring some major scandal or bankruptcy
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Re: Albertsons losses continue, comp sales fall

Post by storewanderer »

I think they mean an increase in comp sales on an overall basis like overall for the year? Maybe?

It would be more interesting to see exactly what is losing money. Safeway claimed all its divisions were profitable after closing Dominicks (including Texas). Are the divisions themselves bleeding now? Is it the ex-Supervalu stuff or the ex-Safeway stuff that is losing money? I presume United and the original Albertsons LLC stuff operate profitably.

I also wonder if combining marginal pieces together has not caused good results. For instance, combining profitable Colorado Albertsons with what looked like a pretty strugging Colorado Safeway division. Or, combining clearly struggling Oregon/Washington Albertsons with what look like relatively solid Safeways...? What I see in the Safeway Stores in NorCal Division is pretty negative but once in a while I find a store with both a nice perimeter and ample staffing levels. Usually it is one or the other, in the worst case it is neither. It is also interesting how shrink is out of control at some stores (perimeters way too full and full of short dated stuff) and looks to be operating at Steve Burd tightness levels at others (nearly empty displays).

I doubt they will close Ponca City. It is supplying a lot of general merchandise all over the company. Despite being remote it is fairly centralized in one regard. Ponca is not really that bad of a location for a general merchandise distribution center (would be a disaster for perishables though). 9 hours to Denver. 5 hours to Dallas. 9 hours to Albuquerque. And you can hit most of United between Dallas and Albuquerque too. 12 hours to Chicago... I think Ponca was an old Skaggs Alpha Beta warehouse and it is funny considering I don't think Skaggs ever was in Kansas and Ponca is positioned well to serve Kansas, but I think they were in Missouri, also well positioned for that. Ponca also has a cool Conoco museum and a couple great restaurants. Nice little town.
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Re: Albertsons losses continue, comp sales fall

Post by pseudo3d »

storewanderer wrote:I think they mean an increase in comp sales on an overall basis like overall for the year? Maybe?

It would be more interesting to see exactly what is losing money. Safeway claimed all its divisions were profitable after closing Dominicks (including Texas). Are the divisions themselves bleeding now? Is it the ex-Supervalu stuff or the ex-Safeway stuff that is losing money? I presume United and the original Albertsons LLC stuff operate profitably.

I also wonder if combining marginal pieces together has not caused good results. For instance, combining profitable Colorado Albertsons with what looked like a pretty strugging Colorado Safeway division. Or, combining clearly struggling Oregon/Washington Albertsons with what look like relatively solid Safeways...? What I see in the Safeway Stores in NorCal Division is pretty negative but once in a while I find a store with both a nice perimeter and ample staffing levels. Usually it is one or the other, in the worst case it is neither. It is also interesting how shrink is out of control at some stores (perimeters way too full and full of short dated stuff) and looks to be operating at Steve Burd tightness levels at others (nearly empty displays).

I doubt they will close Ponca City. It is supplying a lot of general merchandise all over the company. Despite being remote it is fairly centralized in one regard. Ponca is not really that bad of a location for a general merchandise distribution center (would be a disaster for perishables though). 9 hours to Denver. 5 hours to Dallas. 9 hours to Albuquerque. And you can hit most of United between Dallas and Albuquerque too. 12 hours to Chicago... I think Ponca was an old Skaggs Alpha Beta warehouse and it is funny considering I don't think Skaggs ever was in Kansas and Ponca is positioned well to serve Kansas, but I think they were in Missouri, also well positioned for that. Ponca also has a cool Conoco museum and a couple great restaurants. Nice little town.
I had heard that it was Houston that was losing money, and from what I've heard the Louisiana stores have really been harmed because of it. And you're right, the divisions that seem to be the best are "purebred" Albertsons divisions (ACME and Jewel-Osco come to mind), even though they were SuperValu. Ponca City was indeed an old drug/HBA center owned by American Stores that went with Albertsons when it purchased the Texas and Southeast Skaggs Alpha Beta Jewel-Osco stores in 1992. But the DC went with Albertsons LLC in 2006 (not SuperValu), which made sense considering that Albertsons LLC had the Rocky Mountain division, the Southwest division, the Dallas-Fort Worth division, and the Florida division--even the latter was somewhat accessible from the DC. Through all the cuts LLC made (D-FW, later renamed South, lost all the remaining stores south of Dallas, all of which were stragglers from Houston and San Antonio AND its DC, Florida lost all but a handful of stores, its division status, and its DC, NorCal was sold off, and Rocky Mountain also lost its DC and many stores), the Ponca City DC was kept. But now, with the unfortunate "Safeway-ization" in many markets and the HBA being sourced out of the Safeway warehouses, the Ponca City warehouse is getting squeezed out. Maybe it's doing Jewel-Osco now (which it wasn't prior to 2013, unless they had a deal with SuperValu).
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Re: Albertsons losses continue, comp sales fall

Post by BillyGr »

Unless they are somehow referring to two different things:

Say last year you sold item A for $3 and sold 100 of them. This year they sold for $2 and you sold 125 of them.

You'd have an INCREASE in volume (quantity) sold, but a DECREASE in $ amount sold due to the drop in the selling price for each item.
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Re: Albertsons losses continue, comp sales fall

Post by klkla »

pseudo3d wrote:I'm not convinced ABS is in danger of massive 2002-2006 closures but they need to figure out a way to cut losses without closing stores, because nothing* undermines faith faster in a supermarket company faster than division closures.
This loss by itself is not that serious, I agree. And there doesn't appear to be any reason to do division closures, either. I have said in the past that I think they should 'sell' some divisions as opposed to 'close' any divisions as a way to raise cash so that they can pay some of the debt down. If they paid the debt down they would be profitable and then they could do their IPO and use the proceeds from that to pay their debt down even more. Then they could lower prices and improve service in their core markets and become a thriving company as opposed to a mediocre one that can barely make a profit as has been the case for the last couple years.
storewanderer wrote:It would be more interesting to see exactly what is losing money. Safeway claimed all its divisions were profitable after closing Dominicks (including Texas). Are the divisions themselves bleeding now? Is it the ex-Supervalu stuff or the ex-Safeway stuff that is losing money? I presume United and the original Albertsons LLC stuff operate profitably.
I would bet most if not all of the divisions are profitable from an operations. There are three reasons for this loss:

1 - debt
2 - debt
3 - debt
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Re: Albertsons losses continue, comp sales fall

Post by pseudo3d »

klkla wrote:
pseudo3d wrote:I'm not convinced ABS is in danger of massive 2002-2006 closures but they need to figure out a way to cut losses without closing stores, because nothing* undermines faith faster in a supermarket company faster than division closures.
This loss by itself is not that serious, I agree. And there doesn't appear to be any reason to do division closures, either. I have said in the past that I think they should 'sell' some divisions as opposed to 'close' any divisions as a way to raise cash so that they can pay some of the debt down. If they paid the debt down they would be profitable and then they could do their IPO and use the proceeds from that to pay their debt down even more. Then they could lower prices and improve service in their core markets and become a thriving company as opposed to a mediocre one that can barely make a profit as has been the case for the last couple years.
The ones that can stand up to be sold whole (as opposed to in pieces) are the most profitable ones. Maybe not "most profitable", but it would set alarm bells ringing if something like ACME or Jewel-Osco was sold off to a third party, which effectively means that those markets are gone forever. The only sales that really make sense are if a market re-entry is permittable (like Safeway's sale of their SoCal division to Vons, in exchange for a part of the company), or other factors where the division isn't going the way the rest of the company is going (like Safeway's sale of their New York division to Finast when Safeway was still in expansion mode and pushing east). Most of the divisions Safeway and Albertsons have sold off more or less whole have spelled disaster for the buyer (Save Mart, Sobeys, any 1980s Safeway spin-off), and everything else was broken up.

But no, I think there are ways to cut costs (mostly involving distribution, methinks) without messing with store counts or service levels. I'm not sure if they've cut off bloat from the Pleasanton headquarters, and perhaps relocating Lucerne Foods and Safeway NorCal out of their complex.
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Re: Albertsons losses continue, comp sales fall

Post by klkla »

pseudo3d wrote:The ones that can stand up to be sold whole (as opposed to in pieces) are the most profitable ones. Maybe not "most profitable", but it would set alarm bells ringing if something like ACME or Jewel-Osco was sold off to a third party, which effectively means that those markets are gone forever.
What alarm bells are you talking about? Wall Street is already somewhat alarmed at their performance. That's why they haven't been able to get an IPO done on good terms. Wall Street would be happy to fund their IPO is they can pay down some debt and start making money.

Chasing market share for market share's sake never works out well. Interest rates have been rising. The economy is cyclical and we are on year seven of an economic growth cycle. If the economy turns down and interest rates continue to rise they are going to be in a position of having to sell assets at fire sale prices. Better that they sell a division or two and use the money to reduce debt, invest in pricing and improve service.
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