Kroger to merge with Albertsons?

[BillyGr]

They DO have options for "Mid-Atlantic" and Shaw's...but obviously not good ones. The only way they could get rid of the stores in one piece would be some sort of joint partnership with C&S Wholesale Grocers, with C&S supplying the stores and taking over the large ACME facility, throwing in their "Grand Union" stores and whatever other stores they still own, and Albertsons holding a stake in the venture.

There are, of course, a few smaller stores around the region that might also have some interest in at least portions (maybe even large ones).

For instance, you have the now combined Price Chopper and Tops interests that have some overlap with Shaws (mainly in VT and small areas of MA around Worcester) that could be an option for that chain.
Alternatively, something to do with Big Y (which is only in CT and MA, mostly in the part of MA where Shaw's doesn't exist) that would have even fewer overlapping issues.

Not so sure with the Acme section, but it seems that could possibly work into it as well, since they barely overlap with a couple stores in the above (sort of, anyway, not quite sure how close the Acme locations from A&P that are in NY and CT might be to any PC stores in those states, same for anything in PA).

Seems that any of those still might require funding from Albertsons to work, as in your scenario above - perhaps making them the "third leg" of the currently two legged Northeastern Grocers that was made from Tops & PC?

[storewanderer]

Ross and Publix both had money lined up to buy what they wanted at perhaps more than it was actually worth. For Publix at least Albertsons LLC got a great deal, and I think if Albertsons Cos. got a deal like that they'd take it in an instant. I don't think there's any more cases where a landlord wants Albertsons (or whatever) out of the way for new tenants. Yeah, get Albertsons out of the way for...a Dollar Tree and a trampoline park and a Goodwill or whatever....and enough 20k-30k square feet boxes have gone vacant in recent years (Stage Stores bankruptcy in particular, which had lots of Texas and Louisiana stores) that would make a deal especially enticing.

Compounding that is that a significant portion of real estate in the company has already been converted to leases.



I've seen some of that in areas that are no longer viable for retail altogether. At least one Albertsons in Houston was like that, closed after just a few years (was not sold to another grocer) and ended up becoming a big self-storage unit. It was an abysmal location. But again, no one is going to be lining up to buy out a functioning (if marginal) grocery store to redevelop into a non-retail facility. OK, there could be. But they aren't going to be buying in bulk like Ross, Publix, Save Mart, or H-E-B.

I really think many of the current 50k square foot stores are viable for their real estate and other uses. Out west we have Grocery Outlet rapidly expanding and LOVES former grocery spaces (they don't use the whole space). Plus various other retailers. I agree the gyms are not a great thing to see move in, but hardware/ranch format stores strike me as appropriate in many cases.

At this point these chains have largely cycled through the outdated/poorly located 30k square foot stores. Now they are left with a lot of 50k square foot stores. While I agree the loss of the grocery stores will be unfortunate, there are many other tenants who like these neighborhood type of locations and can do well in the spaces. In some cases if the grocery space is redundant (already another grocer at the same intersection), retooling the space for other tenants actually helps the neighborhood by bringing a wider variety of goods/services closer to where people live vs. just having two grocery stores redundantly at the same intersection.

Let's look at my market, the grocery stores of that sweet 50k square foot level that have closed in the past ~15 years and did not reopen as full size other grocers:
Scolaris : Hwy 50 East, Carson City: now split between 99 Only/Grocery Outlet
Scolaris : Gardnerville; was split between Stage/Grocery Outlet - now just Grocery Outlet/Stage vacant
Scolaris : Reno S. Virginia: this was tough and empty a while; now split between Lee's Discount Liquor and Planet Fitness
Scolaris : Reno Lemmon: split between Grocery Outlet/Big Lots
Scolaris : Reno Sharlands: taken over by St. Marys Health Network (medical, pharmacy, lab)
Scolaris: Sparks Disc: split between Grocery Outlet/Big Lots
Scolaris (Sak N Save): Reno Plumb: converted to Lithia car dealership with accompanying closed Longs
Safeway : Reno Kietzke: Floor & Decor
Safeway : Carson City: Cal Ranch
Safeway : Sparks N. McCarran: Dollar Tree (*relocated from elsewhere in center to make room for Fresh & Easy who never opened)/Planet Fitness (was supposed to be Office Depot but they never opened)
Save Mart: Oddie: Sparks: currently vacant (has been a few different thrift stores); long dead Shopko in center demolished and replaced by apartments recently
Raleys: Fallon: vacant a while; now Harbor Freight/Boot Barn

Now if we go back further and look at grocery closures in the area back in the early 90's forward due to relocation, closure, whatever of the old 35k square foot boxes the results are somewhat different:
Scolaris: Reno: 4th/Stoker: was never retail again, converted to funeral home
Scolaris: Reno: Kings Row/McCarran: was never retail again, converted to welfare office, church, other non retail
Scolaris: Reno: Lakeside Court: still vacant
Albertsons: Reno: McCarran/Smithridge: MacFrugal/F2U (presently fully Big Lots)
Albertsons: Sparks: Prater: MacFrugal/F2U (now thrift store/plasma center- the Big Lots relocated to the Sparks Disc Scolaris mentioned above)
Albertsons: Carson City: Fairview: Office Depot (now US Foods/Office Depot)

[Romr123]

That's an interesting analysis of obsolescence... looks like 50k divisible by 2 is a lot more flexible than 35k...lest we forget that real estate is nothing more than the retail sector's technology/science; just like 400k suburban 4 level department store anchors are obsolescent and 200k 2 level department store anchors are likewise, obsolescent. Neither was obsolescent 20 years ago, but sadly, here we are.

The life of a fast food restaurant (i.e. local unit of production) isn't much more than 30 years, as the use cases vary (I was in virtually all the corporate KFC restaurants in the US between 1987 and 1989...in those days there was far more food prep being done than today (a couple examples: in those days coleslaw was chopped in house; biscuits were mixed and rolled in-house); hence the rearchitecting of the "box" to deemphasize prep space. Ditto for McDonalds (ball rooms for the kids were a '90s thing)

[ClownLoach]

That's an interesting analysis of obsolescence... looks like 50k divisible by 2 is a lot more flexible than 35k...lest we forget that real estate is nothing more than the retail sector's technology/science; just like 400k suburban 4 level department store anchors are obsolescent and 200k 2 level department store anchors are likewise, obsolescent. Neither was obsolescent 20 years ago, but sadly, here we are.

You are correct - the boxes around the 35K to 45K range are much less desirable and many of the retailers who used to like that size were Sports Authority, BB&B, and Toys R Us (what do they all have in common?). The size is just difficult enough on most of those size boxes that they cannot easily be used for two retailers who need a proper loading dock facility. Just not enough space outside. Sometimes when they do get divided the result is a shared dock for unloading and wasted common space hallways to create receiving doors inside the building for each retailer. I was involved in leasing one of these Sports Authority stores that was 40K and we only needed 25K or so for our store - but because we were paying the costs for construction - it was determined that it would cost more to reconfigure a shared dock setup and support areas for a second 10K or so retailer next door than we would likely take in for rent on the space. (Thankfully we got the entire building and I got a nice oversized store that the company ordinarily would never pay for)

[arizonaguy]

That's an interesting analysis of obsolescence... looks like 50k divisible by 2 is a lot more flexible than 35k...lest we forget that real estate is nothing more than the retail sector's technology/science; just like 400k suburban 4 level department store anchors are obsolescent and 200k 2 level department store anchors are likewise, obsolescent. Neither was obsolescent 20 years ago, but sadly, here we are.

You are correct - the boxes around the 35K to 45K range are much less desirable and many of the retailers who used to like that size were Sports Authority, BB&B, and Toys R Us (what do they all have in common?). The size is just difficult enough on most of those size boxes that they cannot easily be used for two retailers who need a proper loading dock facility. Just not enough space outside. Sometimes when they do get divided the result is a shared dock for unloading and wasted common space hallways to create receiving doors inside the building for each retailer. I was involved in leasing one of these Sports Authority stores that was 40K and we only needed 25K or so for our store - but because we were paying the costs for construction - it was determined that it would cost more to reconfigure a shared dock setup and support areas for a second 10K or so retailer next door than we would likely take in for rent on the space. (Thankfully we got the entire building and I got a nice oversized store that the company ordinarily would never pay for)

The former Toys R Us down the street from my house has been subdivided into a Burlington and an unknown box (both around 25,000 square feet).

Also the rumor circulating around employees (and it's just a rumor) at Albertsons/Safeway locations around Phoenix is that Kroger (Fry's) will not be acquiring the Arizona stores (sounds like they might be going to SpinCo).

[storewanderer]

The former Toys R Us down the street from my house has been subdivided into a Burlington and an unknown box (both around 25,000 square feet).

Also the rumor circulating around employees (and it's just a rumor) at Albertsons/Safeway locations around Phoenix is that Kroger (Fry's) will not be acquiring the Arizona stores (sounds like they might be going to SpinCo).

What is ironic is AZ probably doesn't even care if they acquire the AZ Stores... most of the complaints are coming from CA, WA, and then politicians who are from states that aren't even being impacted by this merger like Lee-UT and Klobacher-MN.



I don't think they should be allowed to acquire much of anything in SoCal, NV, AZ, OR, WA, CO, UT, ID, AK... only the rural stores where there is no overlap, which are a poor fit for Kroger in the first place. So why do they even want them? They are too small for Kroger, no space to add fuel, Pick-Up, etc.

This merger simply should not go through.

[jamcool]

That's an interesting analysis of obsolescence... looks like 50k divisible by 2 is a lot more flexible than 35k...lest we forget that real estate is nothing more than the retail sector's technology/science; just like 400k suburban 4 level department store anchors are obsolescent and 200k 2 level department store anchors are likewise, obsolescent. Neither was obsolescent 20 years ago, but sadly, here we are.

You are correct - the boxes around the 35K to 45K range are much less desirable and many of the retailers who used to like that size were Sports Authority, BB&B, and Toys R Us (what do they all have in common?). The size is just difficult enough on most of those size boxes that they cannot easily be used for two retailers who need a proper loading dock facility. Just not enough space outside. Sometimes when they do get divided the result is a shared dock for unloading and wasted common space hallways to create receiving doors inside the building for each retailer. I was involved in leasing one of these Sports Authority stores that was 40K and we only needed 25K or so for our store - but because we were paying the costs for construction - it was determined that it would cost more to reconfigure a shared dock setup and support areas for a second 10K or so retailer next door than we would likely take in for rent on the space. (Thankfully we got the entire building and I got a nice oversized store that the company ordinarily would never pay for)

The former Toys R Us down the street from my house has been subdivided into a Burlington and an unknown box (both around 25,000 square feet).

Also the rumor circulating around employees (and it's just a rumor) at Albertsons/Safeway locations around Phoenix is that Kroger (Fry's) will not be acquiring the Arizona stores (sounds like they might be going to SpinCo).

The Safeway stores are too small for Fry’s….and combining both would be a majority market share in Phoenix and Tucson.

[retailfanmitchell019]

What is ironic is AZ probably doesn't even care if they acquire the AZ Stores... most of the complaints are coming from CA, WA, and then politicians who are from states that aren't even being impacted by this merger like Lee-UT and Klobacher-MN.
This merger simply should not go through.

Minnesota and Oklahoma are the two states that don't have an Albertsons or Kroger presence.

Kroger hasn't had a presence in Oklahoma since that Dillons south of I-44 closed (this one was in Pryor, northeast of Tulsa). Albertsons of course, left the state in 2007.

As for Minnesota, Kroger hasn't had any retail presence there since they sold their Minnesota division in 1970. Albertsons Inc. only had 1 store in Minnesota: an Osco Drug in Moorhead (opened as a Buttrey-Osco). They almost bought Rainbow Foods though...

[rwsandiego]

...What is ironic is AZ probably doesn't even care if they acquire the AZ Stores...

Not quite. Arizona Attorney General Mark Brnovich is one of the AGs who called upon Albertsons to scuttle the "special dividend." Here's the announcement on the AG's website.

[pseudo3d]

What is ironic is AZ probably doesn't even care if they acquire the AZ Stores... most of the complaints are coming from CA, WA, and then politicians who are from states that aren't even being impacted by this merger like Lee-UT and Klobacher-MN.

I don't think they should be allowed to acquire much of anything in SoCal, NV, AZ, OR, WA, CO, UT, ID, AK... only the rural stores where there is no overlap, which are a poor fit for Kroger in the first place. So why do they even want them? They are too small for Kroger, no space to add fuel, Pick-Up, etc.

This merger simply should not go through.

Politically, Albertsons/Kroger picked a fight with blue strongholds that aren't going to lose power or change anytime soon. Kroger hasn't really done much in terms of how they expect the post-merger to play out, only speaking in vague terms of lowering prices, etc. with no plan for SpinCo or even how the divisions will be drawn out.

Kroger already has low prices and can compete with the best of them, unless they want to go with the Walmart method of strong-arming suppliers, which is not a good thing for consumers.

Besides NorCal (which presents problems in itself), the markets that Kroger doesn't already have a foot in are either rural areas, areas with Safeway/Albertsons running a distant second, or getting crunched by newer competition.