Oh yeah, the Randalls division (at least the Houston market) was definitely going to be screwed prior to the merger, and a lot of people would've lost their jobs if that was the case. The original Randalls as grown through the "New Generation" stores up to 80,000 square feet and featuring a lot of fresh items was actually inspired by Wegmans (this isn't speculation—Wegmans really was cited in growing Randalls, and H-E-B's Central Market was based on an earlier H-E-B prototype from the early 1990s which they said was inspired by Wegmans and Randalls New Generation stores). All the while Wegmans continues to be much loved. Some tactics to make Randalls more Wegmans-like (after all, the new president of Randalls was once with United, and Market Street was able to pull off a Wegmans model clone decently) would be a boon, though unless they wanted to only focus on the suburbs, they would need to create a class of clearly second class stores like H-E-B and Kroger operate.architect wrote:Actually, prior to the Albertsons sale, the Randalls division was barely turning a profit. Although there are many successful stores in the division, the expense of maintaining an extensive distribution network and marketing campaign for a smaller store base (compared to HEB and Kroger) was dragging down overall profitability. After the Albertsons sale closed, multiple insider sources reported that Safeway was weeks away from announcing the closure of the Randalls division if the sale fell through, in a manner similar to Dominicks. Honestly, the Albertsons sale was the best thing that could have happened in this situation. With the Randalls DC now serving the Lousiana and Florida stores, the division has the potential to add new stores and reduce divisional overhead on a per-store basis.pseudo3d wrote:Whoa now. No one said Randalls was unprofitable, which is what you seem to be implying. Right now, the few (relative) locations still seem to be largely holding their own (with one notable store location I can think that will probably close given a variety of factors working against it). The position of going to a market leader is the impossible thing to leap here.architect wrote:
Personally, I predict that Albertsons will pull the plug on the Houston Randalls stores in the next couple of years, unless if they simply value store count at the expense of profitability. The combination or HEB, Kroger and Walmart is simply too much to compete with at the mid-market level, and the high-end/specialty market is being crowded out by Whole Foods, Trader Joe's, Sprouts, Central Market, and the Central Market components that have been introduced at many Houston-area HEB locations. The Austin Randalls stores will be interesting to watch, as I could see these stores remaining open and being served by the Dallas DC if they are profitable enough. I doubt that Safeway would have opened a new store in Lakeway and planned for a new store in Leander if the Austin-area stores weren't turning a profit, unlike the Houston area stores which were clearly on the chopping block prior to the Albertsons sale. If the Austin-area stores do remain open and retain the Randall's name, it would be an interesting case study of a brand growing from one market to another, then shutting down in it's original market. Albertsons could also sell off the remaining Randalls stores to another operator (Kroger could be a great candidate) and use the proceeds to help finance other operations.
As far as the Florida stores go, they could be served by an East Coast DC in the short term if the Randalls DC was shut down. Washington, DC is actually closer in distance to Florida than Houston.
If Albertsons was to sell off the Houston stores (for whatever reason), many would simply close. H-E-B and Kroger both have bigger stores in most of the same areas, and they'd be lucky if they sold them ALL to new operators, plus you'd have the issue of the Louisiana stores.
As for the "mid-line market", while Kroger and H-E-B are both strong, Walmart even has a problem with the market as-is, as Walmart Neighborhood Market never quite caught on like it did in other markets. Their position of 3rd place is a manageable one as long as sales keep improving as per new numbers.
Additionally, I should note that while the Washington DC distribution center may be marginally closer, there's also stores in the Louisiana area on the way, so with that in mind, the Houston division may make more sense.
Finally, I should remind you that the "original" Houston division from Albertsons didn't close because of low store count, it was a variety of factors, and the statement made by arizonaguy ("poor locations, questionable neighborhoods, intense competition, and were built for development that never occurred") is absolutely correct, and I can think of at least one store for each of those problems. Some of those stores were quite nice and presumably profitable but they were dragged down by the rest, and Safeway already long closed their perception of what were the "bad stores".
The biggest challenge for Randalls is clearly the Houston market. If Albertsons can figure out a way to invest in the remaining store base and differentiate themselves from the competition (particularly through better pricing, and eliminating annoying marketing tactics such as the Remarkable Card for sales), it could be a great turnaround story. Grocers can be immensely successful with a smaller store count if the stores are high-traffic and are also able to grow traffic on their own, reducing marketing expenses. The DFW Market Street locations are a great example, as their success and growth in the market has largely been by word of mouth. I have my doubts that Albertsons will be able to pull of such a feat considering their past history, but I certainly hope that they are able to, even just as a way to maintain the Randalls heritage. I just anticipate that the division has fallen too far to be able to make a rebound which dramatically improves profitability, especially considering that Safeway "watered down" many of the things that truly set Randalls apart from the competition. Also, just for curiosity, what is the poorly-performing location you are referring to? There are several locations in the Houston area I know of which could be considered questionable, but there are also plenty that still seem very successful.
Getting rid of the shopper's card for sales would be the first step in trying to repair the store. It would give them an advantage over Kroger and help propel sales, thus increasing profitability without a ton of investment.