Albertsons vs. Kroger comp spreads
Posted: January 12th, 2020, 12:13 am
This is very interesting. Over the past couple years, Kroger's performance has basically leveled off while Albertsons has gotten better and better. Kroger did way better in the lousy economy a decade ago than they are doing today. I find that ironic.
It seems Kroger in its efforts to centralize more and more and take away uniqueness from the regions has made their performance sub-par to that of Albertsons. In my view the number of mistakes Kroger has made and continues to make are very significant.
Conversely as Albertsons has been able to shed more and more Safeway leadership (who seemed to suffer from operating sort of environment where everything is centralized) and given its divisions more flexibility on merchandising, promotions, etc. they are seeing better growth in comp sales than they have seen... ever.
https://www.winsightgrocerybusiness.com ... -comp-pace
The other part of this story is Albertsons has paid down its debt to less than $9 billion by doing a ton of sale-leaseback transactions. This is still a lot of debt... but this is still another very meaningful change. Tough to say how this strategy will play out long term but that massive debt and the related debt service cost was/is a real problem. It will be interesting to see how much owned real estate remains and what happens to their expense structure with more leased property and less owned property. Tough to say if eliminating debt service costs and replacing with lease payments nets to a gain or what.
Safeway sat on a ton of decades owned extremely valuable real estate in California. I'm not clear how much of this has been part of the sale-leasebacks. Given the efforts in California to uncover more money for the state by trying to change the commercial tax structure under Prop 13, if those efforts are successful to change Prop 13, these companies with decades old owned real estate in that state sitting on historically low values will be in for a pretty significant property tax increase.
It seems Kroger in its efforts to centralize more and more and take away uniqueness from the regions has made their performance sub-par to that of Albertsons. In my view the number of mistakes Kroger has made and continues to make are very significant.
Conversely as Albertsons has been able to shed more and more Safeway leadership (who seemed to suffer from operating sort of environment where everything is centralized) and given its divisions more flexibility on merchandising, promotions, etc. they are seeing better growth in comp sales than they have seen... ever.
https://www.winsightgrocerybusiness.com ... -comp-pace
The other part of this story is Albertsons has paid down its debt to less than $9 billion by doing a ton of sale-leaseback transactions. This is still a lot of debt... but this is still another very meaningful change. Tough to say how this strategy will play out long term but that massive debt and the related debt service cost was/is a real problem. It will be interesting to see how much owned real estate remains and what happens to their expense structure with more leased property and less owned property. Tough to say if eliminating debt service costs and replacing with lease payments nets to a gain or what.
Safeway sat on a ton of decades owned extremely valuable real estate in California. I'm not clear how much of this has been part of the sale-leasebacks. Given the efforts in California to uncover more money for the state by trying to change the commercial tax structure under Prop 13, if those efforts are successful to change Prop 13, these companies with decades old owned real estate in that state sitting on historically low values will be in for a pretty significant property tax increase.