Raley's to buy Arizona chain Bashas'

[arizonaguy]

Supposedly one of the reasons the Bashas boys sold out was the struggle to keep the stores stocked last year… they had a lot of foreign made TP on the shelves and different private label canned goods (such as Parade and IGA-Bashas’ supplies a handful of IGAs in Arizona) This is an increasing problem with the independent chains versus the “Big 5” - supplies go to the big guys first, everybody else last.

The funny thing about that is they actually had TP when no one else did.

IMO, the real reason for selling is the Basha children don't want to run a grocery chain nor do they have the vision (or funding) to become something like Wegmann's, which is also family-owned.

The only reason the chain wasn't sold / liquidated during its bankruptcy (when Albertsons LLC was interested in purchasing it) was because Eddie Basha was still alive. After he died in 2013 the chain has lost any since of direction.

[storewanderer]

We will see how this goes. If Raleys plays its cards right they will basically end up with 3-4 formats. This may be too many formats.
1. Standard Raleys- this should be their standard upper middle class focused grocery store. The Bel Air and Nob Hill banners are Raleys stores in all but name.
2. Food City- hispanic/discount format- can think of one store in NV (Sak N Save) and maybe 2-3 in CA they could convert
3. Bashas- this should be their rural/lower middle class area full service store format with a dumbed down mix, sharper price points, more focus on private label, and needs to be applied to some of their other locations as well, including about half of the Nevada Stores. I would expect to see this "format" applied to some stores under the Raleys name in NV/CA.
4. AJ's- small format gourmet format

Raley's does not compete well against Wal Mart in a rural setting that is lower income. This is why Raleys is out of business in Winnemucca, NV (Ridley's agreed to take the store a few weeks before closure) and Fallon, NV. Raley's can survive against Smith's but those stores do not do well in the lower middle class settings in Nevada where they compete (Sparks N. McCarran, Reno North Hills) but Raleys seems to hold its own in Gardnerville against Smiths. Raley's competes pretty effectively against Safeway in my view with the standard Raley's format (by offering more consistent service, better mix, better quality, and similar high pricing).

There is definitely no room for Raleys ONE unless they just want to virtue signal and waste their time and money. I am sorry to be harsh, but my opinion is based on what I have seen in Truckee since that store opened and the absolute fiasco I am seeing in the Reno ONE conversion.

Raley's owner Mike Teel did open something called a Good Eats in Scottsdale, AZ during a period of time where he was not involved in the day to day at Raley's. It was open about a year according to this blog.
https://freshneasybuzz.blogspot.com/201 ... s-ceo.html
From that blog:
"The Sacramento Good Eats market opening today actually isn't the company's first store. In early 2009 it opened its first fresh food/specialty grocery/cafe in Scottsdale, Arizona, naming it The Kitchen at Good Eats Grocer, in order to put an emphasis on the prepared foods emphasis of the format. The Sacramento store, like the company's name, is just Good Eats. "The Kitchen" has been dropped, as has"Grocer."

In March of this year Good Eats closed the Arizona unit, which was located in The Shops at Gainey Village center in Scottsdale, after just over a year in operation. Good Eats offered no specific reason for the closing."

This purchase by Raleys just seems to go rather counter to statements Raleys was making earlier this year saying they wanted to convert their entire store fleet to Raleys ONE. Nothing in AZ is suited to be converted to that format.... hispanic format stores and stores in rural areas? No way.

[pseudo3d]

When Bashas' was in bankruptcy, Albertsons LLC approached them to buy them, and they told them off. Since then, Bashas' was pretty quiet, ignoring most (if not all) of the divested/Haggen sites.

But Raley's is a weird choice. Not only is there a cognitive disconnect from Raley's and their push for ONE (which Storewanderer has constantly complained about) but Raley's has not been in an expansion mode in years. It's still very isolated from their core base in the Northern California area. Gut feeling is that they probably bought it for a song to fund the rest of the company.

[jamcool]

The question is…will Raley’s be willing to run grocery stores in small AZ towns like Bagdad, Morenci, and Taylor.

[retailfanmitchell019]

The question is…will Raley’s be willing to run grocery stores in small AZ towns like Bagdad, Morenci, and Taylor.

I'm sure they will, as I can imagine Bashas has a monopoly in those small towns.

[storewanderer]

The question is…will Raley’s be willing to run grocery stores in small AZ towns like Bagdad, Morenci, and Taylor.

You have to assume the answer to that question is yes, otherwise, why would they have bought the chain?

Then again I ask myself that question about their purchase of the Scolaris Stores in NV and that was only a six store transaction (only one of those stores really fit Raleys image).

[ClownLoach]

Could this just be the precursor for another transaction?

Seems the only vision current leadership at Raley's had was to try to establish ONE, which if done correctly could have been a valuable asset as an operating model. Obviously we know that hasn't worked out well. Clearly the reason for ONE was to raise the value of the company overall to prospective buyers who could have helped fund the conversion of the chain to the model and profited in the process. ONE is a precursor of a future sellout.

Now they're trying to force growth through acquisition, and being a family owned company Bashas leaped over Albertsons dollars to take what might be pennies from what appears to be another credible independent company.

The red flag to me is the fact that the Bashas senior leadership wasn't invited along for the ride. Even if they didn't want to be a part of it long term usually the previous leadership gets a one or two year contract which smooths the transition on these type of deals. Again doesn't appear to be the case here based on that journal article.

That leads me to believe that this is a half hearted attempt to consolidate a few regional players only to A) shed valuable assets along the way for top dollar (Maybe the Good Food Holdings folks take AJ's off their hands with the deep pockets of their new foreign owners) and B) sell the now larger chain, likely after shedding unprofitable locations, to a bigger fish. The real question is how exactly is the transaction occurring? If the answer is an asset sale of the profitable stores and intellectual property to Raley's then a Chapter 7 of the Bashas shell company still containing the unprofitable or problematic stores - then it is likely that "get bigger fast and sell" scheme. And if the stores that go away in a Chapter 7 resemble what would be overlapping stores in a future merger - either stores across from a Safeway or a Fry's - that will further validate what the real intentions are.

I just hope the Stater Bros. family doesn't want to sell. I would hate to see something like a new "Southwest Grocers Inc." established only to see it go either to a private equity firm that jacks the prices through the roof to fund debt servicing that enables the acquisition, or to just be sold to Kroger or Albertsons later.

[retailfanmitchell019]

Could this just be the precursor for another transaction?

Seems the only vision current leadership at Raley's had was to try to establish ONE, which if done correctly could have been a valuable asset as an operating model. Obviously we know that hasn't worked out well. Clearly the reason for ONE was to raise the value of the company overall to prospective buyers who could have helped fund the conversion of the chain to the model and profited in the process. ONE is a precursor of a future sellout.

Now they're trying to force growth through acquisition, and being a family owned company Bashas leaped over Albertsons dollars to take what might be pennies from what appears to be another credible independent company.

The red flag to me is the fact that the Bashas senior leadership wasn't invited along for the ride. Even if they didn't want to be a part of it long term usually the previous leadership gets a one or two year contract which smooths the transition on these type of deals. Again doesn't appear to be the case here based on that journal article.

That leads me to believe that this is a half hearted attempt to consolidate a few regional players only to A) shed valuable assets along the way for top dollar (Maybe the Good Food Holdings folks take AJ's off their hands with the deep pockets of their new foreign owners) and B) sell the now larger chain, likely after shedding unprofitable locations, to a bigger fish. The real question is how exactly is the transaction occurring? If the answer is an asset sale of the profitable stores and intellectual property to Raley's then a Chapter 7 of the Bashas shell company still containing the unprofitable or problematic stores - then it is likely that "get bigger fast and sell" scheme. And if the stores that go away in a Chapter 7 resemble what would be overlapping stores in a future merger - either stores across from a Safeway or a Fry's - that will further validate what the real intentions are.

I just hope the Stater Bros. family doesn't want to sell. I would hate to see something like a new "Southwest Grocers Inc." established only to see it go either to a private equity firm that jacks the prices through the roof to fund debt servicing that enables the acquisition, or to just be sold to Kroger or Albertsons later.

I can definitely imagine AJ's merging with Bristol Farms. The formats are very similar. Or maybe they can merge with Gelson's.
I can imagine Raley's will want to buy Stater in the next few years. In SoCal, the upper-middle-class Raley's format would do well on the Central Coast, South OC, and North County in San Diego (around Carlsbad/Encinitas).
Albertsons buying Stater would create significant overlap in the IE, Orange County, and Northern San Diego. I doubt they would do that. Neither would Kroger.

[ClownLoach]

Could this just be the precursor for another transaction?

Seems the only vision current leadership at Raley's had was to try to establish ONE, which if done correctly could have been a valuable asset as an operating model. Obviously we know that hasn't worked out well. Clearly the reason for ONE was to raise the value of the company overall to prospective buyers who could have helped fund the conversion of the chain to the model and profited in the process. ONE is a precursor of a future sellout.

Now they're trying to force growth through acquisition, and being a family owned company Bashas leaped over Albertsons dollars to take what might be pennies from what appears to be another credible independent company.

The red flag to me is the fact that the Bashas senior leadership wasn't invited along for the ride. Even if they didn't want to be a part of it long term usually the previous leadership gets a one or two year contract which smooths the transition on these type of deals. Again doesn't appear to be the case here based on that journal article.

That leads me to believe that this is a half hearted attempt to consolidate a few regional players only to A) shed valuable assets along the way for top dollar (Maybe the Good Food Holdings folks take AJ's off their hands with the deep pockets of their new foreign owners) and B) sell the now larger chain, likely after shedding unprofitable locations, to a bigger fish. The real question is how exactly is the transaction occurring? If the answer is an asset sale of the profitable stores and intellectual property to Raley's then a Chapter 7 of the Bashas shell company still containing the unprofitable or problematic stores - then it is likely that "get bigger fast and sell" scheme. And if the stores that go away in a Chapter 7 resemble what would be overlapping stores in a future merger - either stores across from a Safeway or a Fry's - that will further validate what the real intentions are.

I just hope the Stater Bros. family doesn't want to sell. I would hate to see something like a new "Southwest Grocers Inc." established only to see it go either to a private equity firm that jacks the prices through the roof to fund debt servicing that enables the acquisition, or to just be sold to Kroger or Albertsons later.

I can definitely imagine AJ's merging with Bristol Farms. The formats are very similar. Or maybe they can merge with Gelson's.
I can imagine Raley's will want to buy Stater in the next few years. In SoCal, the upper-middle-class Raley's format would do well on the Central Coast, South OC, and North County in San Diego (around Carlsbad/Encinitas).
Albertsons buying Stater would create significant overlap in the IE, Orange County, and Northern San Diego. I doubt they would do that. Neither would Kroger.

Gelson's is a mystery to me. Some of their stores seem to do no business at all, yet they keep investing in remodels throwing good money after bad. Their Irvine store is a ghost town yet they just fully remodeled it. Laguna Beach still looks like an Albertsons with painted on Gelson's wall decor. I still think that Good Food Holdings will wait until Gelson's bankrupts itself and then will swoop in and buy it. The new concept Bristol Farms stores would be perfect for both the Gelson's format as well as AJ's. They combine the best of three formats (Bristol Farms, Lazy Acres, and Seattle's Metropolitan Market), and they fit into a footprint that is about 20% smaller than the original Bristol Farms stores were. The new build Santa Barbara, Mulholland, and Yorba Linda stores are this format and all seem to be massive successes as they feel both like a gourmet store and a natural store. For the dated AJ's concept's smaller buildings this would be a slam dunk.

What we don't know is how indebted Raley's is at this point. If it is a lot of debt then they will need to sell eventually to pay it off. I doubt they paid cash for Bashas. I suspect it is short term leverage with the thought that if they were a bit larger (for better margin through increased buying power, hence the need to grow through Bashas) and they had some kind of growth vehicle that investors or Wall Street find to be sexy like a natural format (the attempt at ONE) then they can get a much larger amount to sell out. All they need is a good story to tell. Maybe they say that they believe that they can grow comps 20% with a ONE format conversion (as long as it isn't in Reno) and they think that 100 of the stores in the new combined chain would be candidates. Someone will buy the company based on that - to investors that is like clipping coupons.

I do not believe that this transaction is for the long haul future operations of Raley's. It's to drive up the selling price, and right now it is clear Wall Street does not value local traditional supermarket chains very highly. Short term advantage is it allows consolidation like this (one stronger regional acquires a weak regional in a different market for what we assume are pennies). I still think that they are going to try to find where that ONE format may fit into a market and try to grow it. There may be areas where they are interested in a supermarket that refuses to sell Coca-Cola etc. (I'm sure a Raley's ONE conversion of the Stater Bros. in Encinitas, CA would be huge and yes I'm aware the Whole Foods there didn't make it but that was because it was a horrible, tiny location with impossible parking just a mile from the well established local "Seaside Market").

[retailfanmitchell019]

This purchase by Raleys just seems to go rather counter to statements Raleys was making earlier this year saying they wanted to convert their entire store fleet to Raleys ONE. Nothing in AZ is suited to be converted to that format.... hispanic format stores and stores in rural areas? No way.

If they end up doing a Bashas ONE format, I could see them converting the stores in Sedona and Catalina Foothills (affluent suburb of Tucson) to this format. My grandparents shopped at the Catalina Foothills Bashas years ago when living there. Perhaps this is the nicest Bashas store.