Gelson's looking to sell owned stores....

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klkla
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Gelson's looking to sell owned stores....

Post by klkla »

Gelson's currently owns three of their 27 stores (free standing locations in West Hollywood and Pacific Palisades, and a shopping center in Calabasas) and according to this article they apparently want to sell them and lease them back:

https://www.wehoville.com/2018/10/15/we ... -property/

Like the Vons in Hollywood that is being sold for $90 million, I would imagine that these three properties will bring in a lot of cash.

But, I also wonder about how profitable they are right now. I was in the Santa Monica store at 5 p.m. on a weeknight a couple weeks ago and it was practically a ghost town. Only one employee working in the deli (with two customers waiting), one in the bakery (with no customers) and one in the beer/wine/tapas/sushi bar (also with no customers at that time). And this is a store that just received a major remodel. There was literally more employees in the store than customers.

It seems like they are also struggling in Del Mar, Carlsbad, Laguna Beach, Marina del Rey, Thousand Oaks and the new store in Rancho Mission Viejo. I would be surprised if any of those stores are profitable and if I'm right that would mean that 25% of their store base would be loss making. That would not seem sustainable.

They also have a lot of stores that haven't been remodeled in 15-20 years: Calabasas, Dana Point, Encino, Irvine, Marina del Rey, Santa Barbara, Sherman Oaks, Tarzana, and North Hollywood. That represents 33% of the store base.

In hindsight, I wonder if buying the eight former Haggen stores for $36 million plus the cost of remodeling them was worth it?
Pacific Beach - doing well
Rancho Mirage - doing well
Del Mar - Probably will be OK over time
Ladera Ranch - was a failure, has already closed.
Carlsbad - Very slow, I would be surprised if this store ever makes money
Santa Monica - Same as Carlsbad except it is on a street with a lot of traffic but doesn't look like it is close to making money anytime soon
Thousand Oaks - Very slow despite complete exterior and interior remodeling before opening
Laguna Beach - So slow they didn't even bother remodeling it

To their credit they have spent a lot of capital in the last year (remodels in Century City, Newport Beach, Del Mar, Carlsbad, Santa Monica, Rancho Mirage and Westlake Village (in process) plus new stores in Rancho Mission Viejo and Manhattan Beach (which will open soon) but of those nine locations it's very doubtful they will get an acceptable return on investment on four of them in the near future.

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Re: Gelson's looking to sell owned stores....

Post by storewanderer »

They may be wanting to take advantage of such high real estate values right now... but then to sign a long-term lease right now at also top of the market lease rates...

Or the investment group(s) that control them want to get some money back, operations/remodels did not produce the desired return, so taking proceeds from real estate sales is another option...

Did they used to own more than 3 stores?

Did Carlsbad get downsized?

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Re: Gelson's looking to sell owned stores....

Post by BreakingThrough »

Carlsbad was indeed downsized.

I think Manhattan Beach will do very well. It is surrounded on all sides by pure, high-income residential. Many, many people will be in walking distance of that store. As in, blocks away with no need to cross major streets. The store itself also looks great from the exterior. The Lazy Acres that opened in neighboring Hermosa Beach was PACKED on opening day (this past Saturday). This part of Los Angeles, the coastal South Bay, got a huge Whole Foods in El Segundo, back in '07-ish, that really introduced the concept of grocery-store as-a-restaurant and grocery-store-as-a-bar to this area in a way that went over very well. Many in this area are comparing Lazy Acres to a "smaller Whole Foods," given the emphasis on prepared foods and lots of seating. I predict that Gelson's will get the same (good) reputation here.

I feel that the areas in which Gelson's is struggling, especially in OC and San Diego, do not have as much experience with grocery-store as-a-restaurant as other areas. The only mystery is the Santa Monica store -- but I think that one is close enough to the famous Venice Whole Foods that people seeking that experience just go to Whole Foods. I think ALL of the struggling stores would have done better if they had new exteriors like Manhattan Beach vs. inheriting rather generic buildings from Haggen.

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Re: Gelson's looking to sell owned stores....

Post by klkla »

BreakingThrough wrote: October 17th, 2018, 12:53 pm Carlsbad was indeed downsized.

........

The only mystery is the Santa Monica store -- but I think that one is close enough to the famous Venice Whole Foods that people seeking that experience just go to Whole Foods. I think ALL of the struggling stores would have done better if they had new exteriors like Manhattan Beach vs. inheriting rather generic buildings from Haggen.
Carlsbad, Rancho Mirage and Thousand Oaks were all downsized.

I agree about changing the exteriors. In hindsight they should have remodeled all the stores before opening. They did not look and feel like Gelson's and I think that is hurting them now.

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Re: Gelson's looking to sell owned stores....

Post by CalItalian »

BreakingThrough wrote: October 17th, 2018, 12:53 pm Carlsbad was indeed downsized.

I think Manhattan Beach will do very well. It is surrounded on all sides by pure, high-income residential. Many, many people will be in walking distance of that store. As in, blocks away with no need to cross major streets. The store itself also looks great from the exterior. The Lazy Acres that opened in neighboring Hermosa Beach was PACKED on opening day (this past Saturday). This part of Los Angeles, the coastal South Bay, got a huge Whole Foods in El Segundo, back in '07-ish, that really introduced the concept of grocery-store as-a-restaurant and grocery-store-as-a-bar to this area in a way that went over very well. Many in this area are comparing Lazy Acres to a "smaller Whole Foods," given the emphasis on prepared foods and lots of seating. I predict that Gelson's will get the same (good) reputation here.

I feel that the areas in which Gelson's is struggling, especially in OC and San Diego, do not have as much experience with grocery-store as-a-restaurant as other areas. The only mystery is the Santa Monica store -- but I think that one is close enough to the famous Venice Whole Foods that people seeking that experience just go to Whole Foods. I think ALL of the struggling stores would have done better if they had new exteriors like Manhattan Beach vs. inheriting rather generic buildings from Haggen.
I don't see the Santa Monica store as in quite an affluent area as other Westside/Coastal stores despite being inside the City of Santa Monica. It was a highly successful Lucky, a little less so as an Albertsons and really they fit the neighborhood better. Plus it's just 2.5 miles between the Santa Monica and Marina del Rey stores. They are undoubtedly cannibalizing each other. Note how Albertsons hasn't even upgraded Vons just up the road on Lincoln to a Pavilions.

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