Albertsons announces strategic review of company

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Re: Albertsons announces strategic review of company

Post by mjhale »

storewanderer wrote: March 17th, 2022, 10:39 pm I am a little surprised Publix seems to be pushing further north, they are going to run into the union situation... they may just be testing the waters to see what happens. Other non union operations like Whole Foods have also done a good bit of expanding so maybe they think they can do it too. But if they try to acquire unionized stores they "close for remodeling" and reopen as non-union in a market like DC (or surrounding areas of MD/VA) I think they will be in for a rude awakening and it will not go smoothly for them. I think Publix is smart enough to know that too.
The union is not what it once was in the DC area in my view. Back when the DC grocery scene was Giant, Safeway, Shoppers and Magruders (plus A&P/SuperFresh before they pulled out) the union was much stronger. It was to the point that the stores would close on a rolling basis in the morning during the week so that employees could vote on the union contract when renewal time was up. In recent years with Whole Foods, Harris Teeter, the variety of ethnic grocers and the hard discounters (Aldi and Lidl) moving in the union is not as strong as it once was. And don't forget that Walmart has expanded all but a handful of stores around the DC area to Supercenters. Those stores that aren't Supercenters have the greatly expanded food sections similar to Target PFresh although with less of an emphasis on produce and meats. Further, Lidl took over a number of former Shoppers locations without a lot of noise from the union. The only time that the union has been very vocal in recent years is with the Ahold-Delhaize merger. The union was able to save the Giant-MD stores in Southern MD and Fredericksburg. They were originally on the divestiture list. I will say that the communities themselves wanted Giant to stay as well so you have a double dose there.

Maybe Publix wouldn't run into too much trouble in the DC area. Harris Teeter on its own and under Kroger has been able to expand without complaints of a non-union grocer moving in. The real question for Publix on the outset is not the union but where to locate stores. Short of buying cast offs from another chain there isn't much in terms of land other than transit oriented multi-level, retail on the first floor stuff going in. I do agree that if Publix were to buy a Giant or Safeway and try to convert it the union would be much more vocal. Further, I think if Publix were to try to continue up the eastern seaboard they are going to run into strong union areas which aren't going to be friendly to a non-union grocer trying to move in. My feeling is that even Baltimore being more blue collar than DC Publix might run into issues even though the large competitors - Giant and Safeway - are the same as what they might face in the DC area.
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Re: Albertsons announces strategic review of company

Post by mjhale »

pseudo3d wrote: March 17th, 2022, 5:46 pm The closest example I can think of is when Publix bought the former Martin's stores off of Royal Ahold as part of the merger, and I'm unfamiliar with the state of Martin's in Richmond (Martin's was probably a more valuable asset than Food Lion when it came to finding new buyers, for sure).
The Publix stores in Richmond were all former Ukrops locations that Ahold purchased and converted over to Martins. Ukrops was a long time, well liked local chain along the lines of Giant-MD when they were still locally owned. The Ukrop family wanted out of food retailing which led to the sale of the stores to Ahold. The family has kept a prepared foods and catering operation from what I can see. Ahold converted what had been local stores in the community to Giant-PA clones that felt disconnected from Richmond from what I read. Ahold also did away with a lot of the prepared foods and unique service oriented things like grocery carryout. When Publix got the stores they weren't in bad shape physically, they just weren't performing to the level that Ahold had expected. What I find interesting is that Publix isn't any more local to Richmond than Ahold was. And the Publix stores in Richmond that I've visited are very average grocery stores with nothing that would make me say oh I'm going to go there over Walmart or Kroger in the case of Richmond or Walmart, Safeway or Giant in the DC area. I'm curious to know how the stores are doing for Publix.
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Re: Albertsons announces strategic review of company

Post by storewanderer »

mjhale wrote: March 19th, 2022, 5:05 pm
And the Publix stores in Richmond that I've visited are very average grocery stores with nothing that would make me say oh I'm going to go there over Walmart or Kroger in the case of Richmond or Walmart, Safeway or Giant in the DC area. I'm curious to know how the stores are doing for Publix.
That is how I feel every time I go to a Publix. But peeling it back a bit further- they are generally well staffed. Bakery puts out excellent key lime pie (didn't like much else I tried; bagels, bread, etc.). Deli puts out excellent sandwiches and hot fried food. Aisles are faced and neatly arranged. Stores are always clean. Not sure how they navigated the COVID period as far as out of stocks and such went but historically I think in stock has also been a strong point of theirs. Their employees will bend over backwards to be friendly and provide service in AL or TN but if you go to a FL unit the service feels much more like, say, the post office (as in the employees know what they are doing, but aren't the friendliest or most efficient).

I think Publix is an image thing for many expansion territory customers such as in GA, etc. (and the only choice to speak of for many FL customers). They go there because it is "not Kroger and not Wal Mart." Kroger is rather sloppy in GA in more locations than they should be sloppy, so I can see how the clean organized Publix may attract customers, similar to the Wal Mart vs. Target thing.

And in some markets I've been to like Nashville, Publix is obviously underperforming compared to Kroger with far less traffic and smaller stores.

Still don't see Publix possibly buying any parts of Albertsons East Coast operations, short of a one off store or two if the opportunity presents.
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Re: Albertsons announces strategic review of company

Post by pseudo3d »

mjhale wrote: March 19th, 2022, 5:05 pm
pseudo3d wrote: March 17th, 2022, 5:46 pm The closest example I can think of is when Publix bought the former Martin's stores off of Royal Ahold as part of the merger, and I'm unfamiliar with the state of Martin's in Richmond (Martin's was probably a more valuable asset than Food Lion when it came to finding new buyers, for sure).
The Publix stores in Richmond were all former Ukrops locations that Ahold purchased and converted over to Martins. Ukrops was a long time, well liked local chain along the lines of Giant-MD when they were still locally owned. The Ukrop family wanted out of food retailing which led to the sale of the stores to Ahold. The family has kept a prepared foods and catering operation from what I can see. Ahold converted what had been local stores in the community to Giant-PA clones that felt disconnected from Richmond from what I read. Ahold also did away with a lot of the prepared foods and unique service oriented things like grocery carryout. When Publix got the stores they weren't in bad shape physically, they just weren't performing to the level that Ahold had expected. What I find interesting is that Publix isn't any more local to Richmond than Ahold was. And the Publix stores in Richmond that I've visited are very average grocery stores with nothing that would make me say oh I'm going to go there over Walmart or Kroger in the case of Richmond or Walmart, Safeway or Giant in the DC area. I'm curious to know how the stores are doing for Publix.
Right, which all ties in to my thought of inheriting Albertsons' stores in Mid-Atlantic is absurd. My suspicion that the Martin's stores were doing average with Publix doing the same volume, and neither one to write home about in terms of doing well for their parent company.

We know that Mid-Atlantic isn't doing particularly well and has lost a lot of ground against Ahold Delhaize and other competitors, that a lot of those A&P stores were losers after all, and has a lot of marginal stores. So why would Publix want them, either? Publix has definitely expanded in a way that they've been able to never done (to my knowledge) a market retreat, something that Albertsons and Kroger are familiar with (as well as others in the past, including pre-acquisition by larger companies--Harris Teeter, Safeway, Schnucks, Winn-Dixie, Smith's, Food Lion, Raley's, and probably others).
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Re: Albertsons announces strategic review of company

Post by storewanderer »

pseudo3d wrote: March 20th, 2022, 10:37 am

We know that Mid-Atlantic isn't doing particularly well and has lost a lot of ground against Ahold Delhaize and other competitors, that a lot of those A&P stores were losers after all, and has a lot of marginal stores. So why would Publix want them, either? Publix has definitely expanded in a way that they've been able to never done (to my knowledge) a market retreat, something that Albertsons and Kroger are familiar with (as well as others in the past, including pre-acquisition by larger companies--Harris Teeter, Safeway, Schnucks, Winn-Dixie, Smith's, Food Lion, Raley's, and probably others).
Outside FL, I've never seen a busy Publix. They have traffic, but they aren't "busy." Usual to see 3-4 checkouts going with no lines to speak of but just steady traffic. This is their model. Smaller store, fewer employees, not crowded, feels like a neighborhood store, relaxed and simple.

I wouldn't be surprised if Publix is doing less volume than the Giant-PA Martin's format was. Giant-PA runs high volume stores. Then problem is when you are an operator like Giant-PA who is used to running 65k square foot stores that easily hit $600k a week in volume for a slow store, and you inherit stores that only do $300k a week in volume which was fantastic for Ukrop's I guess... until they went under financially anyway, even if your programs get them up to $450k a week in sales it still isn't enough relative to the main Giant-PA store base. But that would be high volume for Publix.
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Re: Albertsons announces strategic review of company

Post by pseudo3d »

Amid all the rumors of selling off divisions, I can't imagine that the rumors are really doing much to help Albertsons and its stock price. Unless they really are planning to deep-six a division or two, the company needs to announce something to assure investors and the public that things aren't what they're thinking. A bold new initiative (a soft reboot of ACME into a revitalized and decidedly more middle-market Kings), a new store prototype (maybe something with more GM), or a surprise acquisition (get Lone Star Funds to take on Cerberus' share and merge with SEG?!) could really do wonders. Small stuff could help too...
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Re: Albertsons announces strategic review of company

Post by storewanderer »

pseudo3d wrote: March 25th, 2022, 12:56 pm Amid all the rumors of selling off divisions, I can't imagine that the rumors are really doing much to help Albertsons and its stock price. Unless they really are planning to deep-six a division or two, the company needs to announce something to assure investors and the public that things aren't what they're thinking. A bold new initiative (a soft reboot of ACME into a revitalized and decidedly more middle-market Kings), a new store prototype (maybe something with more GM), or a surprise acquisition (get Lone Star Funds to take on Cerberus' share and merge with SEG?!) could really do wonders. Small stuff could help too...
Recall the first time Larry talked strategic review back in 2006 or whenever. First they came out and said no deal was going to take place and they would be keeping their great assets, all of them, even freestanding drug (which at the time was still a strong performing asset compared to much of their grocery operation and clearly something they could easily split off for a great multiple and keep the rest of the company). Then a few months after that they came out and announced the break up of the company...

The increase in interest rates that appears to be coming this year is also a very serious issue for Albertsons (and many other governments and companies) going forward. If rates actually increase through this year as predicted... Not really clear if they've been paying down debt with all of the real estate sale-leasebacks or where that money goes.
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Re: Albertsons announces strategic review of company

Post by pseudo3d »

storewanderer wrote: March 25th, 2022, 11:38 pm
pseudo3d wrote: March 25th, 2022, 12:56 pm Amid all the rumors of selling off divisions, I can't imagine that the rumors are really doing much to help Albertsons and its stock price. Unless they really are planning to deep-six a division or two, the company needs to announce something to assure investors and the public that things aren't what they're thinking. A bold new initiative (a soft reboot of ACME into a revitalized and decidedly more middle-market Kings), a new store prototype (maybe something with more GM), or a surprise acquisition (get Lone Star Funds to take on Cerberus' share and merge with SEG?!) could really do wonders. Small stuff could help too...
Recall the first time Larry talked strategic review back in 2006 or whenever. First they came out and said no deal was going to take place and they would be keeping their great assets, all of them, even freestanding drug (which at the time was still a strong performing asset compared to much of their grocery operation and clearly something they could easily split off for a great multiple and keep the rest of the company). Then a few months after that they came out and announced the break up of the company...

The increase in interest rates that appears to be coming this year is also a very serious issue for Albertsons (and many other governments and companies) going forward. If rates actually increase through this year as predicted... Not really clear if they've been paying down debt with all of the real estate sale-leasebacks or where that money goes.
Interest rates/economic concerns aside, I wouldn't that be that cynical when comparing this to 2006. Plus, because Albertsons has been mum on the issue, there isn't any issue of subterfuge of saying that they'll keep (most of) the company and breaking it apart within a few months. Albertsons hasn't said they're going to keep divisions or sell divisions; the idea of, say, dumping ACME, is 100% speculation.

Since we are bringing up the 2006 breakup, we'd have to go back to what was happening prior to Larry and what happened during his reign.

Gary Michael, the previous CEO, had expanded the company too fast, too quickly, and a result the company was struggling under the weight of everything it built up. Many of the markets Albertsons had entered recently weren't doing nearly as well as they'd hoped, the NorCal and SoCal markets were practically in revolt due to the conversion and remarketing from Lucky to Albertsons which was done too fast and too hard, and some other disjointed acquisitions complicated the whole scenario. Johnston wasn't a seasoned grocery veteran (or in the grocery business at all) but when he entered the company was fighting more fires than it really had the resources to fight.

San Antonio and the South Texas? Lost too much ground to H-E-B, where their modern and low-priced stores were becoming a fast untenable situation. Gone.

Des Moines? Bought a few warehouse food stores to make into full service stores, too bad they basically drove off our own would-be established base with an entirely new format. Gone.

Houston? Even as Safeway was busy ruining Randalls, it was still a formidable market with an entrenched Kroger and a large supply of H-E-B Pantry stores that were gearing up to fight. Gone.

Kansas City? About five stores here for almost a decade, they're not really going anywhere. Gone.

Mid-South? Most of these were acquired stores that were trying to mesh in with the Albertsons model. Stores that were designed to be boutique grocers, or ones that had restaurants inside of them? Gone.

Taken individually, those problems could've been stabilized, but the company had too much going on to focus on them.

The real problem is that Johnston made things worse for the company (although his focus on technology ventures is familiar) and pulled the plug on even more markets (New Orleans, Omaha, etc.) all the while buying Shaw's/Star Market from Sainsbury (possibly in an attempt to dilute numbers and obfuscate the company's actual health).

On the other hand, despite many divisions not being in great shape, Sankaran hasn't pulled out of any markets yet. His impact on the divisions was merely merging Eastern and ACME into "Mid-Atlantic" and adding Kings/Balducci's to it. The cost-cutting (particularly in centralizing some merchandising decisions, harming the perishable quality, and increasing prices) isn't good, but nuking a division or FIVE as Johnston had done (in addition to the four in 2002, Omaha's 21-store closure meant that Great Plains was dead, and the Oklahoma stores moved to Dallas-Fort Worth) wouldn't reflect well on Sankaran's reputation...and if he didn't want to take the responsibility for that, there would be another CEO at Albertsons right now.

The likely reason why Larry stuck around as long as he did is because he wanted to see things through the chaos, until he realized that it wasn't going anywhere, that's when he cut his losses and took the golden parachute as the company almost completely collapsed. Which is why the company is at a crossroads with no clear answer. Will the focus on technology come at the cost of divisions under Sankaran's watch, and is that gamble worth it? How dire is the company's financial situation that drastic steps need to be taken soon, or are rumors of the company's demise greatly exaggerated? Should Sankaran stay with the company and see the future ahead, or should he jump out before things take a definitive downturn? Would a big new acquisition show the rest of the world is Albertsons is very much alive, or just to keep the masquerade going?

This all brings me to my point--they can't just sit and let the rest of the world make up stuff about the company's health, it's doing nothing for the company. We know that the company isn't facing imminent financial ruin--the stock would be in the toilet by now and/or the C-suite would be resigning real quick (again, neither of which have happened). We DO know that Cerberus wants out...and maybe that's what the thing is REALLY about. When Cerberus dumps its stocks, then the stock price will plummet, and that's when the good news is rolled out, even if it's just "we're keeping the divisions".

Of course, that also assumes that they intended to play the long game all along when the analysts are having their fun about "ooh, what if they want to sell underperforming stores", and I just don't think they're competent enough to actually run that play.
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Re: Albertsons announces strategic review of company

Post by storewanderer »

pseudo3d wrote: March 26th, 2022, 6:39 pm


On the other hand, despite many divisions not being in great shape, Sankaran hasn't pulled out of any markets yet. His impact on the divisions was merely merging Eastern and ACME into "Mid-Atlantic" and adding Kings/Balducci's to it. The cost-cutting (particularly in centralizing some merchandising decisions, harming the perishable quality, and increasing prices) isn't good, but nuking a division or FIVE as Johnston had done (in addition to the four in 2002, Omaha's 21-store closure meant that Great Plains was dead, and the Oklahoma stores moved to Dallas-Fort Worth) wouldn't reflect well on Sankaran's reputation...and if he didn't want to take the responsibility for that, there would be another CEO at Albertsons right now.

The likely reason why Larry stuck around as long as he did is because he wanted to see things through the chaos, until he realized that it wasn't going anywhere, that's when he cut his losses and took the golden parachute as the company almost completely collapsed. Which is why the company is at a crossroads with no clear answer. Will the focus on technology come at the cost of divisions under Sankaran's watch, and is that gamble worth it? How dire is the company's financial situation that drastic steps need to be taken soon, or are rumors of the company's demise greatly exaggerated? Should Sankaran stay with the company and see the future ahead, or should he jump out before things take a definitive downturn? Would a big new acquisition show the rest of the world is Albertsons is very much alive, or just to keep the masquerade going?

This all brings me to my point--they can't just sit and let the rest of the world make up stuff about the company's health, it's doing nothing for the company. We know that the company isn't facing imminent financial ruin--the stock would be in the toilet by now and/or the C-suite would be resigning real quick (again, neither of which have happened). We DO know that Cerberus wants out...and maybe that's what the thing is REALLY about. When Cerberus dumps its stocks, then the stock price will plummet, and that's when the good news is rolled out, even if it's just "we're keeping the divisions".

Of course, that also assumes that they intended to play the long game all along when the analysts are having their fun about "ooh, what if they want to sell underperforming stores", and I just don't think they're competent enough to actually run that play.
They've got one of their strongest most experienced grocery people at this point after the past couple years of retirements running Acme and he has been in place since 2017; I think they have been laser focused for quite some time to turn that operation around. I think Safeway East is a bigger problem and I am not sure what needs to be done there (maybe stop being a plain vanilla Safeway that looks like a CA Safeway or worse and actually be a grocer that tries to merchandise and cater to its market and price appropriately and get a product mix into the stores that has the depth of other east coast chains, to start).

I don't know where it is going with Cerberus or if they plan to keep their holding long term; they've had this holding way longer than they usually have a holding but grocery stores are an excellent cash flow and they've done their share of real estate transactions and other things to dig more value out of the company so I expect they are more than satisfied with how this has gone and how this continues to go.

There are a ton of ways they could split up the company today and potentially mine value. For instance- what if the CA operations were spun off into a separate company with its own stock and split off from the rest of the chain? I think that would be a very valuable operation; it would have some of the best margins in the business and be supported by a number of manufacturing facilities.
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Re: Albertsons announces strategic review of company

Post by CalItalian »

More information on the review & fiscal year 2021 in this article https://www.supermarketnews.com/retail- ... f37&sp_eh=
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