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.