Analyst: SEG will not be around in 5 years

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Analyst: SEG will not be around in 5 years

Post by SamSpade »

https://www.bizjournals.com/jacksonvill ... n.amp.html
The article makes it sound like the company is too far gone but only contrasts with Publix.
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Re: Analyst: SEG will not be around in 5 years

Post by wnetmacman »

Keep in mind that this is an analyst's speculation, and is just that, speculation.

Folks have been saying this is the year for a Sears/Kmart collapse since 2005. So far, they're off by 12 years.

SEG is definitely not making major headway, but they are keeping afloat, and that's more than many other retailers right now.
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Re: Analyst: SEG will not be around in 5 years

Post by pseudo3d »

wnetmacman wrote: November 15th, 2017, 12:10 pm Keep in mind that this is an analyst's speculation, and is just that, speculation.

Folks have been saying this is the year for a Sears/Kmart collapse since 2005. So far, they're off by 12 years.

SEG is definitely not making major headway, but they are keeping afloat, and that's more than many other retailers right now.
Keep in mind, SHLD had way more money than any of its competitors in the late 2000s (they were more cash-rich than JCPenney or Macy's). That's been mostly squandered but there's no way they would last as long as they did if that wasn't the case.

SEG is owned by Lone Star Funds, and that's always going to be the big question. If Lone Star Funds thinks they can get SEG out of trouble (or if it's more worth it) by melting down its properties, then they will. Remember, ten years ago it was Lone Star Funds that threw Bruno's under the bus (separating it from BI-LO) to become an independent company and they went bankrupt two years later.

The question is how exaggerated is SEG's problems are. I don't trust Livingston's opinions (I too wish I could speculate on things and be wrong at least 85% of the time, and if posting my opinions on Retailwatchers was my day job instead of a hobby I do for free, I'd be a much happier man), but if SEG's problems are actually that bad (again, dubious), then Lone Star Funds is probably going to break up the company. The smart thing to do in that case would be to sell off most of SEG's assets and invest it in the best stores in Florida, then try to sell off that chain to Albertsons or Kroger.
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Re: Analyst: SEG will not be around in 5 years

Post by wnetmacman »

pseudo3d wrote: November 15th, 2017, 12:56 pm Keep in mind, SHLD had way more money than any of its competitors in the late 2000s (they were more cash-rich than JCPenney or Macy's). That's been mostly squandered but there's no way they would last as long as they did if that wasn't the case.
That's been beyond squandered, sent to the pawn shop 4 times, and has no hope for continuing short of a larger influence purchasing them. The Sears cash cow was gone when Lampert bought the company in 2005.
pseudo3d wrote: November 15th, 2017, 12:56 pmSEG is owned by Lone Star Funds, and that's always going to be the big question. If Lone Star Funds thinks they can get SEG out of trouble (or if it's more worth it) by melting down its properties, then they will. Remember, ten years ago it was Lone Star Funds that threw Bruno's under the bus (separating it from BI-LO) to become an independent company and they went bankrupt two years later.
Conversely, LSF won't lose money by getting rid of them if they can avoid it. To me, the combination with Bi-Lo was one of the best things they could have done. If there were massive losses, they would have cut ties by now and started the asset sale.

Bruno's problems ran far deeper well before they came into LSF's control. That company was a train wreck well back.
pseudo3d wrote: November 15th, 2017, 12:56 pmThe question is how exaggerated is SEG's problems are. I don't trust Livingston's opinions (I too wish I could speculate on things and be wrong at least 85% of the time, and if posting my opinions on Retailwatchers was my day job instead of a hobby I do for free, I'd be a much happier man), but if SEG's problems are actually that bad (again, dubious), then Lone Star Funds is probably going to break up the company. The smart thing to do in that case would be to sell off most of SEG's assets and invest it in the best stores in Florida, then try to sell off that chain to Albertsons or Kroger.
I don't think SEG's problems are that bad. I do know that they are still remodeling stores and closing unprofitable ones more slowly than before (the last closings were only a group of 3), so it must be working somewhat. When you compare that with SHC, who can't even afford to replace a light bulb without calling Eddie Lampert for a loan....
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Re: Analyst: SEG will not be around in 5 years

Post by pseudo3d »

wnetmacman wrote: November 15th, 2017, 1:19 pm
pseudo3d wrote: November 15th, 2017, 12:56 pmSEG is owned by Lone Star Funds, and that's always going to be the big question. If Lone Star Funds thinks they can get SEG out of trouble (or if it's more worth it) by melting down its properties, then they will. Remember, ten years ago it was Lone Star Funds that threw Bruno's under the bus (separating it from BI-LO) to become an independent company and they went bankrupt two years later.
Conversely, LSF won't lose money by getting rid of them if they can avoid it. To me, the combination with Bi-Lo was one of the best things they could have done. If there were massive losses, they would have cut ties by now and started the asset sale.

Bruno's problems ran far deeper well before they came into LSF's control. That company was a train wreck well back.
Arguably Bruno's essentially died with a number of their executives and two of the founders dying in a plane crash (starting the process with them getting bought by KKR, which nearly put them out of business), but they didn't last long post-bankruptcy before Royal Ahold bought them and combined them with BI-LO.

Even if SEG isn't nearly as desperate as they're painted to be, where can they really go as an independent company?
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Re: Analyst: SEG will not be around in 5 years

Post by storewanderer »

There are quite a few private equity controller and very highly leveraged chains, both larger than SEG, and smaller than SEG. Traditional grocers, ethnic formats, natural/organic formats...

Grocery got hot with private equity firms for the past 5 years and this sort of thing is the way it ends. Or things like the Haggen mess.

It will be interesting how things play out for those other private equity controlled chains in the coming years as well. Some, just like SEG, are obviously quite distressed. Others are pretty good assets. It will be interesting to see how this plays out.
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Re: Analyst: SEG will not be around in 5 years

Post by Knight »

I will agree Southeastern Grocers will not be around in five years. I think Southeastern Grocers will disappear sooner than later. Too much damage has been made under Lone Star Funds' ownership. I project store closings, store divestitures, and market exits occurring in 2018.
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Re: Analyst: SEG will not be around in 5 years

Post by pseudo3d »

Knight wrote: November 16th, 2017, 9:52 am I will agree Southeastern Grocers will not be around in five years. I think Southeastern Grocers will disappear sooner than later. Too much damage has been made under Lone Star Funds' ownership. I project store closings, store divestitures, and market exits occurring in 2018.
Let's be honest here, Winn-Dixie as an independent company did more damage to itself than LSF ever did. Now, granted, the revolving door of new concepts that go nowhere, "lower prices" that cut into profits, and trying to go discount again haven't helped. The bankruptcy had a lot to do with old "dark store" leases Winn-Dixie was paying rent on, but they ran a fleet of dated stores that were going nowhere. They pulled out of Texas 15 years ago and it's astounding they lasted as long as they did, what with other than a few stabs at modernizing in the mid-1980s to the early 1990s. The bulk of the Texas stores were in Dallas-Fort Worth and the areas surrounding them, and they fell well behind in market share past Kroger, Tom Thumb, Albertsons, and Minyard, which were building new stores and updating older ones.

I had thinking that with the Safeway stores in Florida that Albertsons was interested in making a move on SEG somehow (at least their Florida locations) but now I'm not so sure they want to do that. Even if it was a handful of their good stores, LSF has decided that it would be better to keep them as Winn-Dixie instead of cannibalizing the company (to Albertsons or others), which speaks volumes about the actual state of SEG.
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Re: Analyst: SEG will not be around in 5 years

Post by Knight »

Winn-Dixie had issues going back to the late 1990's. At its footprint then, supermarkets BI-LO, Food City, Harris Teeter, Kroger, and Publix and hypermarket Walmart Supercenter were actively engaged in new and expanded stores. Winn-Dixie had been opening Winn-Dixie Marketplace stores, which were replacing two or three Winn-Dixie stores and leaving established trade areas. The Winn-Dixie Marketplace stores were in mostly bad locations and not making sales. The dominoes began falling in 2000.

BI-LO's issues began in the early 2000's under Ahold's ownership. The acquisition of Bruno's turned out to be bad. BI-LO was losing battles against Walmart Supercenter. It stagnated in further expansion in North Carolina and Tennessee.

Instead of keeping up with Walmart, Kroger, Publix, and Ingle's; limited assortment/discount grocers Aldi and Lidl; specialty organic and gourmet grocers Earth Fare, The Fresh Market, Trader Joe's, and Whole Foods Market; and wholesale clubs Sam's Club and Costco, Southeastern Grocers continues to throw itself under the bus.

It could be possible Southeastern Grocers or its banners could linger around. They will be smaller in number after 2018 if stores have closed or have been divested.
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Re: Analyst: SEG will not be around in 5 years

Post by wnetmacman »

Knight wrote: November 17th, 2017, 3:53 am Winn-Dixie had issues going back to the late 1990's. At its footprint then, supermarkets BI-LO, Food City, Harris Teeter, Kroger, and Publix and hypermarket Walmart Supercenter were actively engaged in new and expanded stores. Winn-Dixie had been opening Winn-Dixie Marketplace stores, which were replacing two or three Winn-Dixie stores and leaving established trade areas. The Winn-Dixie Marketplace stores were in mostly bad locations and not making sales. The dominoes began falling in 2000.
While I'm not as familiar with Bi-Lo's troubles, I am familiar with Winn Dixie's. Their problems go much further back.

Winn Dixie has long been an acquisition company. Even back to the early 50's, Winn-Lovett and Dixie Home's combination made news. They spent the next 20 or so years buying little competitors or stores in regions they did not operate in, and that they were not familiar with. While they were somewhat accepted, these assimilations always resulted in a dilution of the brand they bought.

In 1966, the FTC put a 10-year ban on acquisitions on the company, telling them that this rapid growth was starting to squelch competition among retail grocery and bakery operations.

Within days of the ban being lifted, they purchased Kimbell, Inc., taking them into Texas in a big way. A good number of the Kimbell stores, called Buddies, were small and old, with out-of-date ideas (like a full hardware store and limited grocery). But, much the way they had done years before, they assimilated Buddies, taking away the old ideas and alienating customers rapidly. WD would only operate in Texas for a total of 26 years, 1976-2002. Only about half of the store fleet was fully modernized during that time, and there are still several former WD stores that aren't doing much of anything because they cannot survive as a Supermarket.

The Thriftway stores in Kentucky, Ohio and Indiana are another example; a large number of empty hulks awaiting hope. You really can't tell the difference between a newer Thriftway and WD. Failure to know your customer. Ohio and Florida are two different places.

The problem is that they have never reacted to modern trends soon enough. Pharmacies? Didn't add consistently until the late 90's, where Kroger and Publix did long before. Larger stores? 90's. Modernized stores? Only the few stores built since their bankruptcy in 2005. Running stores until they haven't been profitable for years? Still doing it. Keeping dark store leases, a regular occurrence.

These constant mistakes and missteps have haunted the company, and continue even though new management has been a regular occurrence in the company's Jacksonville headquarters since 2005. They simply cannot right the ship.

Does this mean they're going away completely? I do not know. I do know an article I read last night says that SEG has a very high debt to EBIDTA ratio, like 6 times versus almost everyone else's 3 times. It's a scary time, and if Lone Star isn't paying attention, they may get into trouble themselves.
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