Albertsons Q3 sales decline

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pseudo3d
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Albertsons Q3 sales decline

Post by pseudo3d » January 18th, 2018, 1:01 am

http://www.supermarketnews.com/retail-f ... es-decline

This article explains that despite some new promotional strategies, Albertsons same-store sales aren't doing too well. Some interesting points gleaned from this include:

- The sale of their 49% share in Casa Ley is mentioned. It netted $350M but that goes to Safeway shareholders.
- Total traffic in stores has gone down but basket sizes have increased.
- It looks like based on numbers they actually turned a small profit, but only due to tax cuts.
- Albertsons' share in El Rancho is revealed, a 45% share with $70M in cash and $30M in equity. That seems a lot to pay for the 15 stores they did (and it probably is, not even a majority share) but it included a distribution center, a bakery, a further-processed meats plant, and a company that does supermarket equipment distribution. [The closest comparison I can find is in 2004, they paid $135M for Bristol Farms in 2004 dollars, an 11-store operation]
- They mention that the "aggressive promotional activity" in areas with "significant market share" was just price-matched by others.
- Capex is being cut by 20%, whether this means lack of maintenance in stores or just a few stores don't get remodeled is unknown (they've been on a binge with the "LLC" decor and variants as of late, anyway).
- They've spent a lot on automating warehouses, with the Tolleson warehouse going online first (it's unknown if the Tempe warehouse from Safeway will close) and the Jewel-Osco warehouse next
- In reference to the above, the strategy changed to "focus on certain key markets, rather than investing heavily across the entire organization". With the bit about significant market share, this implies that they're working on areas with less-than-significant market share.
- Drive Up and Go will expand heavily next year to 500 stores.
- "The company is also eying about $150 million in cost reductions in the coming year, including reductions in corporate and division overhead, advertising circular costs, packaging costs and other cost reductions" could mean anything in the first part, could mean cutting jobs that really do nothing for stores (like what Safeway had in corporate) or vital components of divisions.

storewanderer
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Re: Albertsons Q3 sales decline

Post by storewanderer » January 18th, 2018, 10:42 pm

I've actually been trying to shift a significant chunk of shopping over to Safeway this month due to the 5% back mobile wallet promotion that Chase is running since Kroger doesn't accept any of the mobile wallets, but I am going to be honest, it has been pretty difficult with Safeway. While they run some pretty attractive ads, other than the items on the front page of the ad, most of the prices are so, so high. Stores are inconsistently stocked. Service is not good, the employees do not seem happy, or particularly well trained.

Product mix in the stores is really weird and some (many) categories just have lousy selection even in large stores (had a recipe that called for white wine vinegar and all a recently reset Safeway where they supposedly added in thousands of new specialty items had was "Star" and some Signature Kitchen stuff both of which I did not really want to buy based on past experiences with the red wine vinegar in both brands being very weak; found some imported from Italy stuff at Smiths which was also on sale at over a dollar less than Safeway's prices).

Pricing is also interesting. They had in last week's ad "boneless skinless chicken breast or thigh - found in service meat" 1.99 low price everyday. Only 1 of the 2 local stores has service meat so I went over there. Nothing marked at 1.99; the breasts were marked at 2.49 "low price every day" and weighed on the scale as such, but then the 1.99/lb was with the club card. I am guessing the NorCal was running an everyday low price of 1.99/lb on the chicken breasts when the ad was printed but opted to increase the price before the ad was actually issued.

I have not been happy with the quality of various of their private label items purchased either. Bakery and deli quality is so inconsistent between stores and between days that I really can't figure out what is going on.

Also here in Nevada, the NorCal Safeways sell these various eggs that have "CA SFFES Compliant" or whatever it is on the package. Many other stores here have those eggs too, like Whole Foods, Save Mart, and some others. I don't know why but for some reason over at the Reno Safeway they take a sharpie and black out that "CA SFFES Compliant" statement on the egg packages, some of the time, but not all of the time. It looks like crap. No other store does this.

So what I find happening is I go to Safeway and pick up ad items (mostly from the front page), then end up stopping at some other place to buy regular price items.

Not much has changed from my viewpoint since Safeway, Inc. was a publicly traded company, as far as things go in NorCal. Safeway still has very high prices. The stores seem to have more bodies of staffing, but the service level is still poor compared to main competitors Raleys and Save Mart due to poor employee training and poor employee attitude whereas both of those competitors seem to do a pretty good job on training/attitude. The inconsistent execution has continued on fresh departments. The private label program that Safeway spent years creating a quality program on seems to be falling apart with putting "Signature Select" labels on commodity items that are commodity quality at best and not premium quality, and often times the name brand item sells for the same of less than the private label too. I really miss the old Safeway from the late 90's and early 00's when they ran stores with better quality products, prices that were below the Kroger divisions they competed with, a VERY strong private label program, and "Superior Service."

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Re: Albertsons Q3 sales decline

Post by pseudo3d » January 20th, 2018, 9:34 am

Albertsons needs to reallocate resources to free up pricing (on that note, I'm still at a loss how transferring a few North Texas stores to United lowered prices significantly by a dollar or more). Before their expansion got out of hand in the late 1990s, Albertsons had claimed to offer low prices in their stores, and I think that's one of the reasons they were able to expand as much as they did.

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Re: Albertsons Q3 sales decline

Post by storewanderer » January 20th, 2018, 10:47 pm

I don't recall being too impressed by the pricing I saw when I went into United's Stores, but that was quite a few years ago now... it wasn't bad or anything like that, but it was no deep savings over a Kroger or Albertsons. Seemed about on par.

I think they tried to fix pricing about last August. The problem at least in NorCal is they jacked the majority of the prices that they lowered, back up. Yet they continue to have banners on the stores out front saying "LowER PRICES" and have this marketing message on their bags as well. The problem is they have stores in Sacramento or Fresno priced exactly the same as stores in San Francisco. Or stores in rural Nevada cities like Hawthorne or Fallon priced the same as stores in San Francisco (except for liquor which varies between the two states). I understand not wanting to have a bunch of confusing zone pricing but they need to recognize where they can charge high prices and where they can't...

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Re: Albertsons Q3 sales decline

Post by pseudo3d » January 21st, 2018, 7:11 am

http://www.idahostatesman.com/news/busi ... 34879.html

Another article in the papers about why Albertsons is still losing money. Takeaway is of course the debt issue.
Sheehan calls the debt “a bit of a liability” but says that it is surmountable.

“For them to gain ground on that debt, they’ve actually got to outperform the market in core markets for a few quarters,” Sheehan said. “At that point, they’ll be fine. If they don’t, there could be challenges.”
Other talking points included:
- The Paul's donuts are still at stores. That's great, but they do make the chain inconsistent as a whole.
- "Decentralized decision-making" is brought up again, but I'm seeing too many signs that it's contrary to that, like some incorrect pricing for certain markets
- The looming break-up question still is there. I think what a lot of people forget is how antagonizing to the company Johnston was. Turning off lights in stores, introducing an unpopular shoppers card, and on top of that, buying Shaw's/Star Market, which they clearly couldn't afford ($2.5 BILLION). Without that, it's possible Albertsons wouldn't have had to give up all the markets they did during LLC's closure, though in fairness, many of been bought back via Safeway.

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Re: Albertsons Q3 sales decline

Post by architect » January 21st, 2018, 10:41 am

storewanderer wrote:
January 20th, 2018, 10:47 pm
I don't recall being too impressed by the pricing I saw when I went into United's Stores, but that was quite a few years ago now... it wasn't bad or anything like that, but it was no deep savings over a Kroger or Albertsons. Seemed about on par.

I think they tried to fix pricing about last August. The problem at least in NorCal is they jacked the majority of the prices that they lowered, back up. Yet they continue to have banners on the stores out front saying "LowER PRICES" and have this marketing message on their bags as well. The problem is they have stores in Sacramento or Fresno priced exactly the same as stores in San Francisco. Or stores in rural Nevada cities like Hawthorne or Fallon priced the same as stores in San Francisco (except for liquor which varies between the two states). I understand not wanting to have a bunch of confusing zone pricing but they need to recognize where they can charge high prices and where they can't...
Arguably, the pricing issues you mention point to an ineffective distribution of stores between divisions. For example, Safeway can command higher prices in the Bay Area proper due to high real estate and operational costs, yet this high pricing extends throughout the NorCal division which clearly puts them at a competitive disadvantage in other markets with lower priced competitors. A similar situation has actually happened with United. In DFW, the United division has been successful with Market Street due to the fact that pricing is not necessarily low, but still competitive with Kroger and other competitors. In addition, they have a bigger emphasis on upscale, local and Texas-made products, much like HEB but on a smaller scale. On the other hand, Albertsons and Tom Thumb's prices in DFW (along with Randalls in Houston and Austin) are priced far higher than pricing at Kroger and HEB, and have in many cases driven shoppers away except in upscale established areas where Tom Thumb has the market cornered based on a lack of available land for competitors to enter. In all honesty, each major Texas market poses its own challenges, and Albertsons is not effectively responding to any of them outside of the United division.

- For DFW, as pseudo3d has mentioned many times, Albertsons' best course of action would be to simply turn over their local stores to United, as clearly they have a formula which has worked in the market. At this point, with HEB potentially a few years away from entering the market on a large scale, Albertsons has a last ditch opportunity to build up a formidable market share before risking a repeat of Randalls in Houston. Market Street's local flair and more competitive pricing are a way to make such a defensive move.
- In Austin, Randalls is considered more of a neighborhood-oriented chain, with smaller stores and higher prices to boot. However, they have been able to remain somewhat successful simply due to the fact that they have many well-established stores in areas which HEB cannot reach. The demographics in Austin are also much more like the West Coast when compared to the rest of the state, so their most logical marketing strategy might actually be to appeal to the anti-HEB crowd. Pricing is not nearly as much of a detriment here, but product selection is key. Any store in Austin which does not focus on natural/organic products and overall freshness is doomed.
- In Houston, Randalls is somewhat lost at this point. Although they have some stores which are upscale and moderately successful, their market share is so minimal that they have almost become an afterthought. To combat this, Albertsons desperately need to improve pricing, and refresh the stores to bring back the local flavor which made the chain once successful.
pseudo3d wrote:
January 21st, 2018, 7:11 am
Other talking points included:
- The Paul's donuts are still at stores. That's great, but they do make the chain inconsistent as a whole.
- "Decentralized decision-making" is brought up again, but I'm seeing too many signs that it's contrary to that, like some incorrect pricing for certain markets
- The looming break-up question still is there. I think what a lot of people forget is how antagonizing to the company Johnston was. Turning off lights in stores, introducing an unpopular shoppers card, and on top of that, buying Shaw's/Star Market, which they clearly couldn't afford ($2.5 BILLION). Without that, it's possible Albertsons wouldn't have had to give up all the markets they did during LLC's closure, though in fairness, many of been bought back via Safeway.
I really hope that Albertsons does not head in the direction of further centralizing everything. Their best move at this point would not only be to give more discretion to the individual divisions, but also to store managers to market each store to its surrounding area. This is one of the things which has made chains such as HEB so successful, as they are able to get immediate feedback on a store by store basis.

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Re: Albertsons Q3 sales decline

Post by pseudo3d » January 21st, 2018, 12:24 pm

architect wrote:
January 21st, 2018, 10:41 am
storewanderer wrote:
January 20th, 2018, 10:47 pm
I don't recall being too impressed by the pricing I saw when I went into United's Stores, but that was quite a few years ago now... it wasn't bad or anything like that, but it was no deep savings over a Kroger or Albertsons. Seemed about on par.

I think they tried to fix pricing about last August. The problem at least in NorCal is they jacked the majority of the prices that they lowered, back up. Yet they continue to have banners on the stores out front saying "LowER PRICES" and have this marketing message on their bags as well. The problem is they have stores in Sacramento or Fresno priced exactly the same as stores in San Francisco. Or stores in rural Nevada cities like Hawthorne or Fallon priced the same as stores in San Francisco (except for liquor which varies between the two states). I understand not wanting to have a bunch of confusing zone pricing but they need to recognize where they can charge high prices and where they can't...
Arguably, the pricing issues you mention point to an ineffective distribution of stores between divisions. For example, Safeway can command higher prices in the Bay Area proper due to high real estate and operational costs, yet this high pricing extends throughout the NorCal division which clearly puts them at a competitive disadvantage in other markets with lower priced competitors. A similar situation has actually happened with United. In DFW, the United division has been successful with Market Street due to the fact that pricing is not necessarily low, but still competitive with Kroger and other competitors. In addition, they have a bigger emphasis on upscale, local and Texas-made products, much like HEB but on a smaller scale. On the other hand, Albertsons and Tom Thumb's prices in DFW (along with Randalls in Houston and Austin) are priced far higher than pricing at Kroger and HEB, and have in many cases driven shoppers away except in upscale established areas where Tom Thumb has the market cornered based on a lack of available land for competitors to enter. In all honesty, each major Texas market poses its own challenges, and Albertsons is not effectively responding to any of them outside of the United division.

- For DFW, as pseudo3d has mentioned many times, Albertsons' best course of action would be to simply turn over their local stores to United, as clearly they have a formula which has worked in the market. At this point, with HEB potentially a few years away from entering the market on a large scale, Albertsons has a last ditch opportunity to build up a formidable market share before risking a repeat of Randalls in Houston. Market Street's local flair and more competitive pricing are a way to make such a defensive move.
- In Austin, Randalls is considered more of a neighborhood-oriented chain, with smaller stores and higher prices to boot. However, they have been able to remain somewhat successful simply due to the fact that they have many well-established stores in areas which HEB cannot reach. The demographics in Austin are also much more like the West Coast when compared to the rest of the state, so their most logical marketing strategy might actually be to appeal to the anti-HEB crowd. Pricing is not nearly as much of a detriment here, but product selection is key. Any store in Austin which does not focus on natural/organic products and overall freshness is doomed.
- In Houston, Randalls is somewhat lost at this point. Although they have some stores which are upscale and moderately successful, their market share is so minimal that they have almost become an afterthought. To combat this, Albertsons desperately need to improve pricing, and refresh the stores to bring back the local flavor which made the chain once successful.
pseudo3d wrote:
January 21st, 2018, 7:11 am
Other talking points included:
- The Paul's donuts are still at stores. That's great, but they do make the chain inconsistent as a whole.
- "Decentralized decision-making" is brought up again, but I'm seeing too many signs that it's contrary to that, like some incorrect pricing for certain markets
- The looming break-up question still is there. I think what a lot of people forget is how antagonizing to the company Johnston was. Turning off lights in stores, introducing an unpopular shoppers card, and on top of that, buying Shaw's/Star Market, which they clearly couldn't afford ($2.5 BILLION). Without that, it's possible Albertsons wouldn't have had to give up all the markets they did during LLC's closure, though in fairness, many of been bought back via Safeway.
I really hope that Albertsons does not head in the direction of further centralizing everything. Their best move at this point would not only be to give more discretion to the individual divisions, but also to store managers to market each store to its surrounding area. This is one of the things which has made chains such as HEB so successful, as they are able to get immediate feedback on a store by store basis.
On Dallas, I initially thought that but United already seems to be showing some stress by taking in ABQ's Albertsons stores and it would be too much to take in the Dallas stores. The Albertsons stores in Dallas were largely successful (even after closing a number of them), and I think the merchandise mix (and pricing) to Tom Thumb are hurting them.

On Austin, the smaller stores in the core need to focus on their demographic but the "outer" stores need to be competitive with H-E-B. Since there's no Kroger in Austin, they need to focus on what Kroger does in Houston to be successful. Dropping the shopper's card to compete with H-E-B would help.

On Houston, while market share is somewhat of a lost cause, they need to go back to their roots. I think the core reason Albertsons failed in Houston was that they underestimated H-E-B, but not in the way you think. In the early 1990s, when Albertsons was on the periphery of Houston but not in Houston, the "big three" were AppleTree, Randalls, and Kroger. With the death of AppleTree, Albertsons must have figured they could slip in and capture that market share. What they didn't realize is that market had been cannibalized by H-E-B Pantry (Food Lion tried to compete with them, but failed) and as a result they never gained traction. H-E-B then "graduated" to a full-time store to officially secure the place of the Big Three. Had the ASC buyout not happened, then Albertsons still probably would've had to admit defeat (though San Antonio could've been saved). Had Albertsons bought Randalls back in the late 1990s, their story might've been different. The big problem in terms of market share is that Randalls has not built a new store in Houston since 2002 (for perspective, the year the last new-build Kmart was built), and a lot of their abandoned spaces (or potential spaces) have been snapped up by Kroger or H-E-B.

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