Albertsons announces strategic review of company

[buckguy]

Ahold / Delhaize makes sense for the rest of the company except for the Mid Atlantic / Northeast segments. I'd imagine that Shaws / Acme / Safeway East would be at least somewhat attractive to one or a combination of Kroger, Publix, Weis, Lidl, Market Basket (DeMoulas), ShopRite (Wakefern). The two divisions seem similar to Dominick's when it was wound down and parted up. The biggest problem is that Ahold / Delhaize is the dominant grocer in the regions that Albertsons needs to divest to make the merger work.

A few problems with your assumptions.

ShopRite has quietly receded a bit from DC area in the last year. They closed their only ShopRite in the DC area and have closed all but one Price-Rite. ShopRite seems to be doing OK in the Baltimore area. OTOH, they (via Wakefern) have expanded PriceRite well into western New York and I wonder how that will go. They also have been trying to re-establish ShopRite in Central Connecticut which is very competitive market. Even though they are the largest operator by far within the co-op. Wakefern is probably only able to add a small number of stores.

Demoulas is a very eccentric operator---they don't generally do really large stores, they seem to grow slowly and I wonder if they've ever bought more than a very few stores from other chains.

Weis has done OK in the Baltimore area but not in DC. They've closed a number of old Food Lions in outer areas of DC. I don't see them as able to absorb many new stores.

The DC area would be very different from any place Publix has entered. The biggest area they've entered in the past was Atlanta, which was an opportunity waiting to happen---Kroger and a bunch of poor operators and some small competitors. They benefited from Harris-teeter's ineptitude and never had significant competition beside Kroger. DC has a big Whole Foods presence and a growing Wegman presence, as well as a re-awakened Giant-Landover and successful local natural foods chains. the shoppers are more cosmopolitan and foodie than in most of their other markets. Publix has plenty of existing markets to fill-out, too.

Dominick's had been a strong second to Jewel known for its perishables program. Safeway did not maintain that and the chain quickly cratered. It would have done much better if they'd left it alone.

When you say Demoulas doesn't do really large stores, do you mean they don't really do large acquisitions? Or do you mean they tend to have smaller sized buildings? Because I was initially thinking that Market Basket might want some Shaw's if they're sold off but Market Baskets tend to be much larger than Shaw's. I'm not sure Demoulas/MB has any or many stores under 60,000 square feet, and some of their newest locations are well over 100,000 (see Chelsea, MA at 130,000). That's like the size of three Shaw's. But I do agree that they tend to grow slowly and organically, not through purchases or acquisitions.

Market Basket has had to cutback on openings because they have a heavy debt load which makes buying other chains' stores less likely. The >100K sf stores are an anomaly. They have older stores that are less than 60K sf. The seem to take advantage of redevelopment projects for at least some of their newer stores which makes me think they look for incentives or unique opportunities to dominate new markets. The Chelsea store was on the site of dead mall and a rare opportunity to build big inside the Rt. 128 beltway and draw people from a wide area. Chelsea itself is an inner ring suburb that has seen better days.

[pseudo3d]

I assume you're referring to the locations in Roswell and Ruidoso? In that case, those are just old Furr's-turned-IGAs that United picked up a few years ago. They rebranded the Texas stores they bought at the same time as United Supermarkets (their main brand, which like H-E-B, runs the gamut from A-line stores to tiny old stores) and eventually rebranded the Albertsons/Albertsons Market stores in North Texas they picked up in Midland-Odessa as United as well.

And locations in Albuquerque and Alamogordo those are also run by United as Albertsons Market. They are priced radically better than a Southwest Division Albertsons but perimeter department mix/quality and overall store condition are simply a step lower. Things like shelves not faced- not part of the program there (no different than Kroger), unfilled perimeter cases since their program doesn't have the mix the Southwest Division had, noticeably lower scale product mixes, etc. You could just say they know their market better and downscaling the stores reflects the market they are operating in... they did convert one store in Santa Fe to Market Street, but it isn't executed very well there.

Albertsons Market is United Supermarkets in all but name. They eliminated the name in the Panhandle, and the supermarket chain still plays by its own rules when it comes to merchandising and local stores. A store in Quanah, Texas (predating Albertsons) is 27,000 square feet and has, among other things, a large selection of Faygo (instead of the typical Signature drinks), an enlarged hardware department (including lumber), and fishing equipment.

I think if Safeway East Division and/or Acme are sold they will get split up in pieces. And all you have to do is look at UNFI's efforts to unload Shoppers, to see how easy of a task that is.

UNFI has made it clear that they aren't in the supermarket retailing business (this started under SuperValu), therefore, it's not going to harm their business that they have cut ties with their chains. Shoppers Food & Pharmacy was always third place in the DC-area grocery race, and even as UNFI has closed and sold stores, it's a slow phase-out and they're in no hurry. Even as of now, they have 20 stores down from 36 in 2019 and 51 in 2017. The combined Mid-Atlantic Division is a few hundred stores, and selling it is counter-intuitive to what they want to do. At the end of the day, Albertsons wants to be in more markets. That was their goal in the early 2000s, probably already drawing up plans for a St. Louis to make a continuous line of stores from Chicago to New Orleans, and eyeing potential acquisitions in the Midwest to bridge the gap between the ACME stores (which would be rebranded) and Jewel-Osco (which would've also probably been rebranded, at the very least, "Jewel by Albertsons"). And with acquiring Safeway, they were able to try to make that dream become a reality again, though obviously it's an uphill battle and they're still in no shape to start founding divisions outside their home base. Their only major expansion outside of their market area is the former A&P stores, and that hasn't gone well.

I think Phoenix and Denver Safeway Divisions are both potential problem divisions, as well as certain parts of other divisions. Especially Denver I think has a lot of problem clusters of stores that simply are run poorly and do not perform even close to where they should perform. Phoenix is probably viable now between some improvements they've made and adding in the Albertsons stuff including El Paso and Las Vegas but Safeway's operation in Phoenix was positioned horribly due to Safeway's high pricing before the Albertsons merger and the rural stores where Fry's wasn't around helped things for Safeway but didn't make up for their getting slaughtered around Phoenix.

The Denver division (particularly the Denver market) probably got a boost from the recent King Soopers strike and I would definitely agree about underperformance, but again, I doubt it's a significant drag on the company's finances and they certainly wouldn't benefit much from selling them. Phoenix was reformed into Safeway's Southwest division at some point in the past, and today it benefits from the El Paso and Las Vegas markets. Like Denver, Phoenix also suffers from the "who to sell it" problem.

[arizonaguy]

I assume you're referring to the locations in Roswell and Ruidoso? In that case, those are just old Furr's-turned-IGAs that United picked up a few years ago. They rebranded the Texas stores they bought at the same time as United Supermarkets (their main brand, which like H-E-B, runs the gamut from A-line stores to tiny old stores) and eventually rebranded the Albertsons/Albertsons Market stores in North Texas they picked up in Midland-Odessa as United as well.

And locations in Albuquerque and Alamogordo those are also run by United as Albertsons Market. They are priced radically better than a Southwest Division Albertsons but perimeter department mix/quality and overall store condition are simply a step lower. Things like shelves not faced- not part of the program there (no different than Kroger), unfilled perimeter cases since their program doesn't have the mix the Southwest Division had, noticeably lower scale product mixes, etc. You could just say they know their market better and downscaling the stores reflects the market they are operating in... they did convert one store in Santa Fe to Market Street, but it isn't executed very well there.

Albertsons Market is United Supermarkets in all but name. They eliminated the name in the Panhandle, and the supermarket chain still plays by its own rules when it comes to merchandising and local stores. A store in Quanah, Texas (predating Albertsons) is 27,000 square feet and has, among other things, a large selection of Faygo (instead of the typical Signature drinks), an enlarged hardware department (including lumber), and fishing equipment.

I think if Safeway East Division and/or Acme are sold they will get split up in pieces. And all you have to do is look at UNFI's efforts to unload Shoppers, to see how easy of a task that is.

UNFI has made it clear that they aren't in the supermarket retailing business (this started under SuperValu), therefore, it's not going to harm their business that they have cut ties with their chains. Shoppers Food & Pharmacy was always third place in the DC-area grocery race, and even as UNFI has closed and sold stores, it's a slow phase-out and they're in no hurry. Even as of now, they have 20 stores down from 36 in 2019 and 51 in 2017. The combined Mid-Atlantic Division is a few hundred stores, and selling it is counter-intuitive to what they want to do. At the end of the day, Albertsons wants to be in more markets. That was their goal in the early 2000s, probably already drawing up plans for a St. Louis to make a continuous line of stores from Chicago to New Orleans, and eyeing potential acquisitions in the Midwest to bridge the gap between the ACME stores (which would be rebranded) and Jewel-Osco (which would've also probably been rebranded, at the very least, "Jewel by Albertsons"). And with acquiring Safeway, they were able to try to make that dream become a reality again, though obviously it's an uphill battle and they're still in no shape to start founding divisions outside their home base. Their only major expansion outside of their market area is the former A&P stores, and that hasn't gone well.

I think Phoenix and Denver Safeway Divisions are both potential problem divisions, as well as certain parts of other divisions. Especially Denver I think has a lot of problem clusters of stores that simply are run poorly and do not perform even close to where they should perform. Phoenix is probably viable now between some improvements they've made and adding in the Albertsons stuff including El Paso and Las Vegas but Safeway's operation in Phoenix was positioned horribly due to Safeway's high pricing before the Albertsons merger and the rural stores where Fry's wasn't around helped things for Safeway but didn't make up for their getting slaughtered around Phoenix.

The Denver division (particularly the Denver market) probably got a boost from the recent King Soopers strike and I would definitely agree about underperformance, but again, I doubt it's a significant drag on the company's finances and they certainly wouldn't benefit much from selling them. Phoenix was reformed into Safeway's Southwest division at some point in the past, and today it benefits from the El Paso and Las Vegas markets. Like Denver, Phoenix also suffers from the "who to sell it" problem.

Again, if Phoenix is such a dog of a division, why are they continuing to open up new build stores.

Announced yesterday:

https://www.yourvalley.net/stories/safe ... ise,290986

The Phoenix Business Journal Article here lists the details: https://www.bizjournals.com/phoenix/new ... uZmEJkuGPk

Called Sterling Grove Shopping Center, the $27 million retail project will consist of a 63,290-square-foot Safeway, 20,000 square feet of connected retail space and 22,500 square feet between five standalone buildings on about 20 acres in Surprise.

[storewanderer]

Again, if Phoenix is such a dog of a division, why are they continuing to open up new build stores.

Announced yesterday:

https://www.yourvalley.net/stories/safe ... ise,290986

The Phoenix Business Journal Article here lists the details: https://www.bizjournals.com/phoenix/new ... uZmEJkuGPk

Called Sterling Grove Shopping Center, the $27 million retail project will consist of a 63,290-square-foot Safeway, 20,000 square feet of connected retail space and 22,500 square feet between five standalone buildings on about 20 acres in Surprise.

I think adding in the Albertsons units to Southwest Division, including Las Vegas and El Paso, as well as operating the (back before the merger) marginally performing or failing Phoenix-area Safeway units more like an Albertsons, has helped to improve performance of the Southwest Division. It is called the Southwest Division, not the Phoenix Division (Safeway called it the Phoenix Division). It would be interesting to see a ranking of which division is most/least profitable in total then on a profit per store basis. My guess is Southwest outperforms Shaws, Acme, Denver, and Texas at this point. So it is a long ways from the bottom.

[pseudo3d]

Yeah, in looking at the Safeway divisions as it stood in 2013 the Southwest Division as we know it was the Phoenix Division, one of the last of the "city" based divisions of Safeway. (According to the 2013 Fact Book, it seems to combine Seattle and Portland as "Northwest", and has three Canadian divisions instead of the one but that could be just for operating area listing purposes).

The Safeway stores in Washington DC (called "Eastern", even before Genuardi's apparently, but I can't nail down when this happened) must have been extremely profitable at one point, because they're in parts of the city that competitors don't really go, they've been in the area since the 1930s (always an isolated division, though at one point in antiquity Safeway probably dreamed up expanding that way), and they were spared the cuts in the 1980s that saw all those eastern divisions (in the middle of the country) sold off. Most of the trouble there seems to be in the NoVa area suburbs. And there's still nothing "fatally wrong" with the division, like Dominick's.

The more I think about it, the less likely the unions are to blame for the demise of Dominick's. Not because I look particularly favorable on grocery store unions as some do, or that Jewel-Osco was also unionized, but if unions were really the problem, Safeway could've issued a meeting to buy out the unions or else. Buy them out and Dominick's turns a profit, if the unions balked, Safeway could just blame the closure on them. But since that didn't happen, I have to assume there was some other big fixed expense that made Dominick's unworkable.

[buckguy]

Yeah, in looking at the Safeway divisions as it stood in 2013 the Southwest Division as we know it was the Phoenix Division, one of the last of the "city" based divisions of Safeway. (According to the 2013 Fact Book, it seems to combine Seattle and Portland as "Northwest", and has three Canadian divisions instead of the one but that could be just for operating area listing purposes).

The Safeway stores in Washington DC (called "Eastern", even before Genuardi's apparently, but I can't nail down when this happened) must have been extremely profitable at one point, because they're in parts of the city that competitors don't really go, they've been in the area since the 1930s (always an isolated division, though at one point in antiquity Safeway probably dreamed up expanding that way), and they were spared the cuts in the 1980s that saw all those eastern divisions (in the middle of the country) sold off. Most of the trouble there seems to be in the NoVa area suburbs. And there's still nothing "fatally wrong" with the division, like Dominick's.

The more I think about it, the less likely the unions are to blame for the demise of Dominick's. Not because I look particularly favorable on grocery store unions as some do, or that Jewel-Osco was also unionized, but if unions were really the problem, Safeway could've issued a meeting to buy out the unions or else. Buy them out and Dominick's turns a profit, if the unions balked, Safeway could just blame the closure on them. But since that didn't happen, I have to assume there was some other big fixed expense that made Dominick's unworkable.

Unions are often blamed for operations that are simply incompetent, unsuccessful and unlikely to survive even with lower wages and looser work rules. It's an old dodge. The business press would faithfully report it without noting other obvious problems. The business press now seems to notice bigger problems with struggling chains. Dominick's was owned by the founding family when it was sold to Safeway--the younger generation simply didn't want to be involved. The chain was in good shape.

Your description of Safeway in DC is a little dated. They once had quite a few stores in areas with no chain competition but that was in the 90s and it was supported by charging more in DC than they did in the suburbs (no longer the case). Some of those monopoly locations were in affluent areas of the city like the Watergate complex, southwest DC, Dupont Circle, Palisades, and the Chevy Chase neighborhood. They also seemed to have a handshake relationship with Giant whereby when one chain closed a store, the other would make a significant investment in either remodeling or replacing an existing store nearby. That happened in Adams-Morgan, Van Ness and the Alabama-Naylor area in SE Washington. Safeway has kept a few small locations in well-off areas but closed most of the inner city locations in the early 2000s. Giant has opened new stores in a number of inner city areas, following the trail of gentrification and Safeway faces much more robust competition from them and others in DC proper than they have in decades.

The Eastern Division title probably dates to their consolidation of what was left of formerly separate operations that included a Richmond Division that went as far west as Charlottesville and as far south as the Outer Banks in North Carolina. They also had a small division in south central Pennsylvania, based in York, PA. Safeway's strength in the DC area, outside of DC proper, was in Virginia while Giant was stronger in Maryland. This is no longer as true as it once was but it may explain why they moved more aggressively in Virginia. Safeway also has a sizable operation in the Baltimore area, although they have never been dominant there---Acme and Food Fair were much stronger competitors in B'more than in DC. You can still see old A-frame Acmes and pylon Food Fairs throughout the area. A&P also was a bigger competitor than in DC and Giant was the B'more market leader for a long time (and probably still is). They've also faced a changing set of B'more independents over the years, something they never had in DC where they and Giant successfully kept out new competitors for many years. Safeway also had stores on the Eastern Shore in Maryland and down the DelMarVa peninsula, as well as stores in the Maryland panhandle.

Safeway once had stores in the NYC area--this operation was sold to First National in the 60s. It's likely that they had long-term ideas about expanding throughout the mid-Atlantic region. Safeway in DC dates back to the 20s when they bought the local Sanitary Stores chain. The NYC stores were bought in '41.

[jamcool]

Again, if Phoenix is such a dog of a division, why are they continuing to open up new build stores.

Announced yesterday:

https://www.yourvalley.net/stories/safe ... ise,290986

The Phoenix Business Journal Article here lists the details: https://www.bizjournals.com/phoenix/new ... uZmEJkuGPk

Called Sterling Grove Shopping Center, the $27 million retail project will consist of a 63,290-square-foot Safeway, 20,000 square feet of connected retail space and 22,500 square feet between five standalone buildings on about 20 acres in Surprise.

I think adding in the Albertsons units to Southwest Division, including Las Vegas and El Paso, as well as operating the (back before the merger) marginally performing or failing Phoenix-area Safeway units more like an Albertsons, has helped to improve performance of the Southwest Division. It is called the Southwest Division, not the Phoenix Division (Safeway called it the Phoenix Division). It would be interesting to see a ranking of which division is most/least profitable in total then on a profit per store basis. My guess is Southwest outperforms Shaws, Acme, Denver, and Texas at this point. So it is a long ways from the bottom.

The Phoenix Division was originally all of Arizona except for Yuma (operated by San Diego)and Gallup NM. When Safeway sold SoCal to Vons, Yuma went into the Phoenix division. And yes, the Phoenix division made its money in small towns as often the only grocer in town-Bashas’ competes in some towns.

[storewanderer]

The Phoenix Division was originally all of Arizona except for Yuma (operated by San Diego)and Gallup NM. When Safeway sold SoCal to Vons, Yuma went into the Phoenix division. And yes, the Phoenix division made its money in small towns as often the only grocer in town-Bashas’ competes in some towns.

When did Safeway close in Yuma? I seem to recall they were there in the 00's but I may be wrong. It looks like they have not been there for quite some time. However Albertsons is there...

[jamcool]

They have stores in Yuma, they were added to the Phoenix division when Vons took over in SoCal

[storewanderer]

They have stores in Yuma, they were added to the Phoenix division when Vons took over in SoCal

What happened to those Safeways in Yuma after Phoenix took them over? It appears they were closed by Phoenix, many years ago now. There is no Safeway in Yuma anymore, and has not been in at least 15 years. There are however two Albertsons at the present time in Yuma.