Albertsons announces strategic review of company

This is the place for general and miscellaneous posts on topics which might extend past the boundaries of any specific region. No non-grocery posts.
Post Reply
arizonaguy
Veteran Member
Veteran Member
Posts: 897
Joined: July 12th, 2013, 6:07 pm
Has thanked: 1 time
Been thanked: 37 times
Status: Offline

Albertsons announces strategic review of company

Post by arizonaguy »

Source: https://www.supermarketnews.com/retail- ... g0zlVmf7eU

This doesn't sound good. To me these "strategic reviews" are either the precursor to taking the company back to 100% private equity ownership, selling off divisions or other assets, or filing for bankruptcy. I don't think the company is bankrupt so I'd imagine either 100% private equity ownership and/or division sales are on the table.

Private equity firms don't like to own companies for long periods of time. Cerberus has been involved with Albertsons for about 16 years and probably wants out.

It's somewhat of a shame that they weren't able to take advantage of the somewhat weakened position Kroger is in right now.

I'd imagine the Northern California, Jewel-Osco, and United Texas divisions could probably fetch some decent offers. I'm not sure what much of the rest of the company would be worth.
User avatar
retailfanmitchell019
Diamond Member
Diamond Member
Posts: 440
Joined: November 10th, 2019, 11:17 am
Location: 760 area code
Has thanked: 41 times
Been thanked: 48 times
Status: Offline

Re: Albertsons announces strategic review of company

Post by retailfanmitchell019 »

Holy sh*t, round 2 of the breakup?

Loblaw, Sobeys, Sainsbury, AEON, are you listening?

If sales were to happen, I can imagine them selling Randalls and the Mid-Atlantic Safeway stores.

I hope they don't turn into another Kmart... :cry:
storewanderer
Valued Contributor
Valued Contributor
Posts: 9479
Joined: February 23rd, 2009, 3:54 pm
Has thanked: 1 time
Been thanked: 532 times
Contact:
Status: Offline

Re: Albertsons announces strategic review of company

Post by storewanderer »

Did not see this coming given the investments they are making in remodels, e-commerce, and just the generally upbeat attitude I am observing in their operation lately.

Don't mention Sobeys.... trainwreck...

This explains their really erratic moves on pricing in recent months to levels way far out of line (well, they remind me of Safeway's pricing at its worst under Burd as Lifestyle was being rolled out, and also of Supervalu's pricing at the stores before Supervalu completely crashed and burned).

I am a little surprised they were not more sensitive in describing what they are doing. This is almost a direct repeat of what the old CEO Larry who broke up the company the first time said back in 2005 or whenever. There are still many people in Albertsons not just hourly but also middle management who remember that period and frankly I am pretty surprised they did not describe what they are doing here, a bit differently.

I don't think their intention here is a sale of the company, but back in the Larry days I think that was one of the stated intentions.

I also think they are too heavily concentrated in California and going forward I see that as a big problem based on population trends out of CA, and demographics of who remains in CA. Their format is not in line with the formats showing store count growth in California (ethnic formats and formats like Whole Foods/Sprouts). However I would venture their California business is highly profitable and will be for a number of years to come so I wonder if a spin off of that California business would be something that could "maximize value." At this point they have no ethnic format in California- despite having even a small store count of ethnic stores for many years. They have the Amigo's format from United-TX they could import. The closest thing they have to an ethnic format in their chain is those Utah Lucky Stores (which basically follow the pattern of the ethnic formats Albertsons ran in CA for many decades).

In some ways I feel like this merger took some of the worst aspects of Safeway (complete stubbornness on formats) in some ways where it really should not have gone that way.
HCal
Gold Member
Gold Member
Posts: 274
Joined: February 1st, 2021, 11:18 pm
Has thanked: 2 times
Been thanked: 109 times
Status: Offline

Re: Albertsons announces strategic review of company

Post by HCal »

Yikes, this is concerning. NorCal is their core market, I doubt they will sell that. If anything, they will sell smaller or peripheral markets like Texas or the DC/northeast area, in order to focus on places where they have more market share.

At this point they are probably too big to be acquired outright by another supermarket chain, and I'm not sure there is appetite among investors to sell more shares. So most likely, some other private equity group is going to swoop in, and that usually doesn't end well.
storewanderer
Valued Contributor
Valued Contributor
Posts: 9479
Joined: February 23rd, 2009, 3:54 pm
Has thanked: 1 time
Been thanked: 532 times
Contact:
Status: Offline

Re: Albertsons announces strategic review of company

Post by storewanderer »

HCal wrote: February 28th, 2022, 11:09 pm Yikes, this is concerning. NorCal is their core market, I doubt they will sell that. If anything, they will sell smaller or peripheral markets like Texas or the DC/northeast area, in order to focus on places where they have more market share.

At this point they are probably too big to be acquired outright by another supermarket chain, and I'm not sure there is appetite among investors to sell more shares. So most likely, some other private equity group is going to swoop in, and that usually doesn't end well.
Their mistake was probably trying to run things too much like Safeway. It seemed like they had good results "cleaning up" the Supervalu mess initially just reverting back to an older Albertsons type of operating model. They should have gone with how the Cerberus group ran its initial 200 stores- eliminate loyalty card pricing, implement a price cut program on various staple items, and push service levels and fresh department execution hard.

Instead once Safeway came into play suddenly it was to do many things the Safeway way. While that probably made some sense for some of the back end things like private label, systems, and such, anyone who is even half awake saw how Safeway was doing after the Lifestyle program stopped propping up their financial results and as a customer saw how poor the Safeway mix, pricing, employee attitude, and overall store operation had become due to terrible labor and pricing decisions made to prop up their numbers for Wall Street, and how Safeway units in markets that had a strong Kroger competitor had lost customers in droves. I would also argue Safeway had a very broken private label program as too much of it was priced higher than national brand items were priced at competitors. Safeway was very customer unfriendly toward the end of its time as a public company with various policies in place that were just a hassle, combined with chronically understaffed stores making matters even worse. While Albertsons did increase staffing levels in these Safeway Stores and there have been some execution improvements (moreso in some markets than others) many of the major problems remain. While they have increased foot traffic in some of the markets where Kroger was absolutely killing them (like Denver and Phoenix), they still don't have anywhere close to the traffic Kroger has in those markets.

They really needed to just get back to basics and run a simple operation. I guess some of the divisions like the Albertsons banner, United-TX banner, Jewel, Acme, and even Shaws are still at least loyalty card free. They should do that across their banners; eliminate loyalty card pricing for sale items and focus on execution. Also that everyday shelf pricing- seriously, come on- fix it. Chainwide. And keep it fixed.
ClownLoach
Veteran Member
Veteran Member
Posts: 513
Joined: April 4th, 2016, 10:55 pm
Has thanked: 5 times
Been thanked: 134 times
Status: Offline

Re: Albertsons announces strategic review of company

Post by ClownLoach »

They have proven to be able to run the company with significant long term debt service and interest expenses. The problem is that Private Equity firms use new debt to acquire companies then transfer that debt into the acquired entity. Albertsons cannot accommodate more debt in that manner.
And rising interest rates will sour the desires of private equity firms for some time until they stabilize or go back down - after all the last thing they want to spend is their own cash in hand. Furthermore long term debt is already crippling the company and I wonder if the rates are locked in or if some of it is affected by the prime rate. They were not doing well not so long ago so I would expect that some of that debt is variable interest and their options are limited. Interest rates are going up which will cost them a fortune. But interest rate increases mean they can't refinance the debt either. It's more interest expense or... More interest expense. This forces them to look at other options. If they can sell some divisions and use the proceeds to retire enough problem debt that will get them back on track although they pay the price long term in reduced economy of scale. If having the debt reduced allows for more CapEx to grow the remaining business then it might not be such a problem. But if they can't sell enough small pieces and have to sell it all they're going to need to be acquired by a larger entity with deep pockets and lots of cash on hand that can pay off most or all of the debt. There are not a lot of companies that I can think of that would do this for Albertsons.

The sudden rapid price increases might have been intended to drive comp sales improvements in an effort to increase the stock price, and in turn sell for a higher amount.

The reality is that when a company suddenly announces that they're seeking strategic alternatives publicly - they have been doing exactly that for many months if not years and they're at the endgame so they finally have an obligation to notify the shareholders. It isn't like Albertsons CEO woke up a couple of days ago and said "You know what? I'm getting tired of all this debt service. Let's call some investment bankers today to review strategic alternatives and issue a press release this afternoon.". It means that the internal, management led strategic process has been completed over however many months or years and now has reached the point where it is time for outside counsel (such as investment bankers) to come on board to finish the job.

If I had to guess I would say that they will retreat to being a primarily Western US company and sell most if not all operations in the Eastern half of the country. There are enough regional players over there to absorb individual nameplates, states, or divisions without getting into trouble with the FTC. Probably draw a line roughly from Dallas to Chicago and everything right of the line gets sold off enabling the restructured Albertsons to be a super regional operation.
Super S
Valued Contributor
Valued Contributor
Posts: 2343
Joined: April 1st, 2009, 9:27 pm
Has thanked: 26 times
Been thanked: 101 times
Status: Offline

Re: Albertsons announces strategic review of company

Post by Super S »

Albertsons did some questionable things in the wake of the whole Haggen fiasco, including regaining control of some of the stores they were required to divest to Haggen. In some cases such as Baker City they are operating Safeway and Albertsons almost across from each other. I can't see another operator acquiring groups of stores after what happened to Haggen.

I think there is a possibility that we will see some markets streamline in to one banner. Oregon and Washington I could see them eliminating the Albertsons and Haggen names in favor of Safeway. Haggen is such a small group now, and Albertsons has already converted a handful of stores to Safeway.

The problem with the Safeway banner is that it has lost some of its focus. At one point it was a little more upscale, but in recent years it's hard to tell what kind of customer they are trying to attract, especially when they cheap out on lighting among other things. And the staffing levels at Safeway are no better than the front end at Walmart in some instances. Albertsons locations in the same markets as Safeway that have remained open are for the most part stagnant with an uncertain direction. If Safeway is trying to present a lower priced image, fine. Start by eliminating the cards and gimmicks.

Albertsons has proven that they can build some very nice stores, such as the new Broadway store in Boise. It's hard to tell if that format will be rolled out elsewhere.

Having spent some time living in Boise in the 1980s, I got to experience a different era of Albertsons and I kinda wish it would have remained its own company.
marshd1000
Veteran Member
Veteran Member
Posts: 522
Joined: March 2nd, 2009, 1:46 pm
Been thanked: 15 times
Status: Offline

Re: Albertsons announces strategic review of company

Post by marshd1000 »

Super S wrote: March 1st, 2022, 8:39 am Albertsons did some questionable things in the wake of the whole Haggen fiasco, including regaining control of some of the stores they were required to divest to Haggen. In some cases such as Baker City they are operating Safeway and Albertsons almost across from each other. I can't see another operator acquiring groups of stores after what happened to Haggen.

I think there is a possibility that we will see some markets streamline in to one banner. Oregon and Washington I could see them eliminating the Albertsons and Haggen names in favor of Safeway. Haggen is such a small group now, and Albertsons has already converted a handful of stores to Safeway.

The problem with the Safeway banner is that it has lost some of its focus. At one point it was a little more upscale, but in recent years it's hard to tell what kind of customer they are trying to attract, especially when they cheap out on lighting among other things. And the staffing levels at Safeway are no better than the front end at Walmart in some instances. Albertsons locations in the same markets as Safeway that have remained open are for the most part stagnant with an uncertain direction. If Safeway is trying to present a lower priced image, fine. Start by eliminating the cards and gimmicks.

Albertsons has proven that they can build some very nice stores, such as the new Broadway store in Boise. It's hard to tell if that format will be rolled out elsewhere.

Having spent some time living in Boise in the 1980s, I got to experience a different era of Albertsons and I kinda wish it would have remained its own company.
I think that the Eastern Division has opened a Safeway that looks like the Albertsons Market Street and Broadway stores in Boise. IF the Haggen banner were to be eliminated, it would be a mistake to downscale the Haggen stores. They could make then a "Safeway Market Street" and keep the same product mix.
Brian Lutz
Veteran Member
Veteran Member
Posts: 1096
Joined: March 1st, 2009, 5:51 pm
Location: Lake Stevens WA
Been thanked: 83 times
Contact:
Status: Offline

Re: Albertsons announces strategic review of company

Post by Brian Lutz »

The problem with some of the remaining Haggen stores in Washington is that a lot of them are close to existing Safeway stores, so the most likely result in most cases would just be closing the Haggen stores.
pseudo3d
Valued Contributor
Valued Contributor
Posts: 3276
Joined: November 12th, 2015, 7:01 pm
Has thanked: 20 times
Been thanked: 74 times
Status: Offline

Re: Albertsons announces strategic review of company

Post by pseudo3d »

The first to go, I'd imagine would be the 45% stake in El Rancho.

Other than that, there's several key problems with just selling off divisions.

- LLC was able to sell off the divisions and stores to those that wanted them, so NorCal was sold to Save Mart, most of Florida was sold to Publix, and the remaining Dallas-Fort Worth (later Southern) division stores were sold to H-E-B.
- There's just not enough regional supermarkets anymore that Albertsons can sell to, part of the reason why the Haggen sale happened.
- Selling Texas to H-E-B means that effectively that market (fast-growing) is shut out forever, and the size, overlap, and wrong market areas means that most of those stores would never be supermarkets again.
- They grossly overpaid for Balducci's/Kings. I was expecting that they could leverage the Kings name to rebrand some of the flagging Greater New York-area ACME stores.

The only thing that makes some sense is spinning off United Supermarkets and Southern Division as one entity while maintaining a share in it and licensing the name.
Post Reply