Albertson's loss = $437 million most recent year

[klkla]

I read from old Supermarket News archives (though I don't have it with me) that the Lifestyle stores had higher sales but lower profit margins (sounds right). ... Regarding Lifestyle, I remember reading about 10 years ago that part of this was to make Safeway more "distinct" as a supermarket (I dug through my no-longer-complete BusinessWeek archives to find the article to no avail), which works into my theory of the acquired assets underperforming in their own markets, as well as their closures of several stores in each division in fall 2005. I suppose Safeway could've sold Randalls, Genuardi's, and Dominick's in that time (and rumors were they did want to sell) but if the pressure is on with Wall Street, that wouldn't have looked good to start selling off those sorts of assets (or maybe it was Safeway's pride/stupidity, who knows).

If they had higher sales AND lower profit margins that certainly wasn't the plan. The perimeter departments generally have the highest margins in a supermarket and center store the lowest. The Lifestyle format was geared towards improving perimeter department sales.

There's no doubt that the acquired assets were under performing. The acquired assets from the Steven Burd era, with the exception of Vons, were all disasters. They paid billions for Dominick's, Genuardi's and Randall's/Tom Thumb. In the end they couldn't even give Dominick's away and just closed the entire division down. They found buyers for a few Genuardi's but generally let that chain die a slow death. They never could find a buyer for the Texas stores after years of trying and finally decided to convert the best properties to the Lifestyle format and have closed almost half the original stores over the last fifteen years.

Wall Street was actively trying to convince Safeway to sell those stores. The problem was nobody was willing to buy them. That's how bad they messed them up.

[storewanderer]

And we ran into the "nobody willing to buy them" problem again with the Haggen situation.

I think Safeway was expanding its margins during the first few years of lifestyle. That was when they were rapidly escalating prices to heights never seen before and posting little sales increases and saying the format was working. Of course it took a few years but the entire thing fell on its face and stores sat with $5.99 half gallons of Minute Maid Orange Juice (not even that much today), $3.29 Betty Crocker Cake Mixes (also not even that much today), etc.

First Albertsons and later Safeway fell victim to Wall Street demands for profitability. The worst part was the timing of that was during the rapid Wal Mart Supercenter rollout all over the US. Kroger was doing much of the same in the 1999-2002 period but after Ralphs NorCal and Smiths in Montana/Wyoming and I suspect some other smaller market areas with big problems, it was around 2003 when a handfull of Kroger Divisions started to toy around with some lower pricing programs. And to this day some Kroger Divisions (Ralphs, QFC) still have very high everyday prices across the board and the others still have a scattered mix of good everyday pricing and some pretty high everyday pricing, but it is generally good everyday pricing on key items and not so good on the more obscure items. Also Kroger will adjust prices at the store/market level if need be to stay competitive.

When a Wal Mart Supercenter opened across from a previously high volume Safeway in Reno, the attitude of Safeway NorCal Management was "we don't care if we lose customers, we will not be getting into any price wars." This was back in the lifestyle era. The Albertsons across the street from that store ran aggressive ads and ran a strong EDLP program (only that location, no others) and kept its business going to some extent. Safeway lost 40% of its business. Today the Safeway continues along doing moderate volume, the Albertsons is a Save Mart which does little-no business and I have no idea how it stays open, and Wal Mart's parking lot is packed to the gills all day and well into the night. Later Wal Mart opened additional Supercenters in Reno and Carson City and the Safeway locations directly competing which were low volume to begin with ended up out of business.

[mbz321]

. They found buyers for a few Genuardi's but generally let that chain die a slow death.

The majority of Genuardi's stores went to Ahold/Giant(PA) (with about 3 or so going to Weis Markets), making Giant even more dominant in the Philadelphia suburbs than it already was. Giant tested the waters when they purchased two locations in 2010 (one was a high volume store, the other was a bomb that ended up shuttering a few years later, although there were also a few that closed without a replacement before and after Genuardi's liquidation. There was actually still a store operating as Genuardi's (Audubon, Pa) until this past spring (2015) due to some odd lease agreement.

Interesting to note, Safeway still holds the leases still of a few locations (and I believe a few of the stores that are operating as Giant). I think about three of those have become independent/specialty grocery stores. The former Genuardi's in Barnegat, NJ is funny enough going to reopen this year as an Acme.

[pseudo3d]

Does anyone know how much Albertsons was losing in the years leading up to the breakup of the company? Seems like they were making a string of terrible decisions in the last few years of their "life". They had to slam on the brakes of an ambitious force-their-way-in type of entry of Houston, part of the problem being that they were rapidly expanding with full-service stores all maybe 50,000-60,000 square feet, and many of those stores just had terrible, terrible locations, and to make matters worse, when the pressure was on to perform, they spent another $2B to buy Shaw's, rendering their "cutbacks" from pulling out of Houston and San Antonio pointless. Even the Bristol Farms purchase seemed too high for what they were getting (11 stores for over $100 million?!

[wnetmacman]

According to this filing:
SEC 2005 Final Filing
Albertsons was still profitable during their last year of operation, albeit marginally.

The cause for the original split wasn't that they were losing money, they weren't making as much. That causes shareholders to get nervous when profits fall. It had an enormous impact on the stock price, among other issues. Their buying spree (Jewel/American Stores, Shaw's) was starting to weigh down, and as previously stated, the divisional closures that had taken place hadn't fully had time to affect the bottom line before they started spending on acquisitions. Kmart showed during the 80's and 90's that acquisitions aren't always the best way to grow a company, especially if you don't have knowledge on how to run in a particular region or business. Albertsons, Inc., was no exception. They had little knowledge of ASC or Shaw's and it hurt the bottom line.

Essentially, it's not whether you win or lose, it's how much you win. Profits are the key indicator of a healthy business.

[pseudo3d]

According to this filing:
SEC 2005 Final Filing
Albertsons was still profitable during their last year of operation, albeit marginally.

The cause for the original split wasn't that they were losing money, they weren't making as much. That causes shareholders to get nervous when profits fall. It had an enormous impact on the stock price, among other issues. Their buying spree (Jewel/American Stores, Shaw's) was starting to weigh down, and as previously stated, the divisional closures that had taken place hadn't fully had time to affect the bottom line before they started spending on acquisitions. Kmart showed during the 80's and 90's that acquisitions aren't always the best way to grow a company, especially if you don't have knowledge on how to run in a particular region or business. Albertsons, Inc., was no exception. They had little knowledge of ASC or Shaw's and it hurt the bottom line.

Essentially, it's not whether you win or lose, it's how much you win. Profits are the key indicator of a healthy business.

A patchwork of fixer-upper brands doesn't exactly inspire confidence, but it may work out in the end, though there are some definitely dubious choices even today that I can't tell is planning for something big or an example of corporate stupidity...like renovating the last three Florida stores and (currently) using a distribution center hundreds of miles away. I guess we can just wait to see how the "new" Albertsons unfolds and the flurry of integrating settles down.

[storewanderer]

I don't think the original Albertsons should have broken up in the first place and they had made some improvements in the 2 or so years before the break up. They made a pretty heavy improvement to their private label program from a quality standpoint and were promoting it better. Wild Harvest brand and in-store departments copied from Shaws looked promising but they never got that off the ground. They had also made some improvements to their fresh departments, especially bakery and also produce and meat to some extent. But they were underperforming the competition in so many markets it was clear that they could not continue with the strategies they had been using. I think it was an example of a company that was simply out of control, lacked clear direction, lacked common sense (anyone remember the "Extreme Value Buy?" or the "dual store director" program where there was one store director for 2 or 3 locations?), and did not deploy capital properly. There was also a very good synergy between the drug stores and the grocery stores and it is unfortunate those were broken up. The management at the time may not have known the grocery business but they knew business good enough to see that if they followed the same path they had been on, they would tank and start losing money in 2-5 years and that is why they broke the company up. It was their "easy way out" rather than admitting they were clueless and bringing in better management. I kind of feel like Safeway did the same thing by selling and was in a somewhat similar situation. However, Safeway's assets were arguably much more valuable than those of the old Albertsons; between the very valuable California real estate and all of the manufacturing plants.

[pseudo3d]

I don't think the original Albertsons should have broken up in the first place and they had made some improvements in the 2 or so years before the break up. They made a pretty heavy improvement to their private label program from a quality standpoint and were promoting it better. Wild Harvest brand and in-store departments copied from Shaws looked promising but they never got that off the ground. They had also made some improvements to their fresh departments, especially bakery and also produce and meat to some extent. But they were underperforming the competition in so many markets it was clear that they could not continue with the strategies they had been using. I think it was an example of a company that was simply out of control, lacked clear direction, lacked common sense (anyone remember the "Extreme Value Buy?" or the "dual store director" program where there was one store director for 2 or 3 locations?), and did not deploy capital properly. There was also a very good synergy between the drug stores and the grocery stores and it is unfortunate those were broken up. The management at the time may not have known the grocery business but they knew business good enough to see that if they followed the same path they had been on, they would tank and start losing money in 2-5 years and that is why they broke the company up. It was their "easy way out" rather than admitting they were clueless and bringing in better management. I kind of feel like Safeway did the same thing by selling and was in a somewhat similar situation. However, Safeway's assets were arguably much more valuable than those of the old Albertsons; between the very valuable California real estate and all of the manufacturing plants.

Original Albertsons should've taken the time to make some cutbacks that eventually Albertsons LLC and SuperValu did, pulling out of underperforming markets and selling those stores. It's possible that they would've finished 2013 stronger than they did.

Safeway on the other hand was not going anywhere good. They had already taken the time to sell off underperforming assets, or in some cases, profitable ones like Canada. If Albertsons hadn't bought them, then the Texas division would definitely be history...the Houston stores would've been fought over between independents, H-E-B, Kroger, and Fiesta, the Austin stores probably would've been taken by Kroger, and the Dallas stores would've been taken over by H-E-B, Albertsons, and Kroger, with H-E-B probably taking the distribution center for a Dallas invasion. And then what? The remainder of the Eastern division? The manufacturing plants? Safeway had invested in an expensive remodeling program that would've made little difference as they continued to spiral downhill. Safeway made the decision to sell in 10 minutes! If that doesn't say "throwing in the towel" I don't know what does.