Stater Bros. Overtakes Ralphs in Revenue

[ClownLoach]

I read today in the Orange County Register that Stater Bros. exceeds $4 billion per year now as they have steadily grown. That means Stater Bros now exceeds Ralphs in volume.

I know that we have discussed the deterioration of Ralphs as they have closed well over 100 stores under Kroger ownership, but I did not previously realize that Stater Bros. now exceeds their annual revenue. Based on a review of all credible publicly available information, Ralphs Grocery Co. Division of Kroger has fallen to $3.6B. At one point in 1997 Ralphs annual revenue was $5.5B, and in today's dollars that would be $10.5B. In effect Ralphs has lost two thirds of its revenue since the Fred Meyer and Kroger acquisitions. And this would include Food4Less in the total.

Unfortunately it is hard to determine the revenue of ACI's SoCal operations, but this does start to put the less-than-expected store divests in California into perspective. I saw a chart indicating without divests the combined company would only control 25% of the LA market or less post merger while they theoretically would control half of Seattle.

[storewanderer]

Stater of course is doing better. Stater keeps opening new stores (closes a store here and there but not many). Stater keeps remodeling stores.

Ralphs doesn't open new stores very often, store remodels are done constantly but the stores often looked better before the remodel than after. There is a ton of new competition opening that picks off Ralphs customers. Most Ralphs do not have a large footprint, fuel offer, pharmacy offer, etc. as standard Kroger stores do. Price structure at Ralphs is noticeably higher than most other Kroger divisions (not as bad as QFC though). It feels like the Kroger programs aren't executed as well and do not work as well at Ralphs as they do at Fred Meyer, Smiths, Frys, etc. due to these limitation with the physical facilities of Ralphs.

Ralphs could have been successful in NorCal had they priced properly. Ralphs chose to price higher than Safeway and Raleys, of course they failed in the market. Even though back then Ralphs ran excellent operations (sparkling clean stores, excellent perishables, well staffed) the pricing was so out of whack for the market it completely turned away customers.

So this also raises the question why does Kroger want to acquire Safeway which gives them a ton of Ralphs-like stores all over the west/mid atlantic. It doesn't make sense. Operating that type of store is not Kroger's best ability. It seems to be their worst.

[ClownLoach]

Stater of course is doing better. Stater keeps opening new stores (closes a store here and there but not many). Stater keeps remodeling stores.

Ralphs doesn't open new stores very often, store remodels are done constantly but the stores often looked better before the remodel than after. There is a ton of new competition opening that picks off Ralphs customers. Most Ralphs do not have a large footprint, fuel offer, pharmacy offer, etc. as standard Kroger stores do. Price structure at Ralphs is noticeably higher than most other Kroger divisions (not as bad as QFC though). It feels like the Kroger programs aren't executed as well and do not work as well at Ralphs as they do at Fred Meyer, Smiths, Frys, etc. due to these limitation with the physical facilities of Ralphs.

Ralphs could have been successful in NorCal had they priced properly. Ralphs chose to price higher than Safeway and Raleys, of course they failed in the market. Even though back then Ralphs ran excellent operations (sparkling clean stores, excellent perishables, well staffed) the pricing was so out of whack for the market it completely turned away customers.

So this also raises the question why does Kroger want to acquire Safeway which gives them a ton of Ralphs-like stores all over the west/mid atlantic. It doesn't make sense. Operating that type of store is not Kroger's best ability. It seems to be their worst.

Well I never thought we would all say it, but maybe you have the reason for the acquisition. The Safeway/Albertsons people are better at running these smaller size stores than Kroger. And at the same time there isn't space for Kroger size big stores all over the country; they're lucky Fred Meyer was around to get big boxes in the PNW and even then I think they ran better before the acquisition. If they want to penetrate these markets where real estate costs prevent 100K stores with big parking lots and fuel stations then they need to plop down an Albertsons size store and right now they don't have a viable format that performs well in that size. The two groups most similar are Ralphs and QFC which are as you said the worst run parts of Kroger today.

I really think if they were allowed to merge, which continues to look cloudy, they would best put the Safeway/Albertsons people in charge of the entire Ralphs division and eventually remodel the Ralphs stores into the Safeway/Albertsons format. This seems to be the size and format that works well in the Coastal markets while the larger Kroger formats work in the rest of the country. Every indication recently has been that they would not necessarily unify the banners or formats but this would be a good relaunch of the Ralphs brand with the cleaned up, easier to shop Albertsons/Safeway format with a decent racetrack around the perimeter and no clutter of random fixtures or pallets of junk that block the aisles. I do think there was tremendous monetary value to the "legendary" Ralphs banner even though it's a shadow of itself otherwise it might have made more sense to offload that name to C&S. Really becoming curious as to what are the few (60 something?) stores they planned to sell to C&S and how many are Ralphs vs a Safeway/Albertsons banner. I can think of many close overlaps, which would be the only stores likely sold in the current limited count, where they'd probably be better off unloading the Ralphs unit. Maybe some of the LA big volume stores would be kept over a nearby Vons since many of those are in worse shape but I can think of cases where the Ralphs probably underperforms to an Albertsons around the corner. A decade ago that Ralphs would probably have run circles around the Albertsons.

Knowing the shrink problems and labor costs in LA, and seeing the fact the banner has effectively lost 2/3rds of its volume, I wonder how viable Ralphs really is now and worse how many good units exist to just prop up marginal or break even stores to maintain local buying power and profitability of warehouses/distribution fixed costs. There are definitely some locations that are real gems but I wonder how many at this point, less than 100 for sure. When the last union negotiations were suddenly resolved because Kroger said they would just close the doors at Ralphs if a strike occurred vs hiring scabs, and the underlying message was if the stores closed they might just permanently exit the market, I wonder if that threat was real and not necessarily bluffing? (They could have easily found a C&S type acquirer for SoCal who would have purchased assets after a spinoff which would then BK out of unwanted leases, heck Bodega Latina probably would have taken it and the union would have been SOL)

It's really interesting that the more this merger talk has forced us to scrutinize these chains, the more we are all recognizing the dramatic improvement of the Albertsons banner and how, even though pricing hasn't been their best suit, they are arguably the best operator in the most valuable markets (faster growing, higher income, and lower shrink).

[veteran+]

Stater of course is doing better. Stater keeps opening new stores (closes a store here and there but not many). Stater keeps remodeling stores.

Ralphs doesn't open new stores very often, store remodels are done constantly but the stores often looked better before the remodel than after. There is a ton of new competition opening that picks off Ralphs customers. Most Ralphs do not have a large footprint, fuel offer, pharmacy offer, etc. as standard Kroger stores do. Price structure at Ralphs is noticeably higher than most other Kroger divisions (not as bad as QFC though). It feels like the Kroger programs aren't executed as well and do not work as well at Ralphs as they do at Fred Meyer, Smiths, Frys, etc. due to these limitation with the physical facilities of Ralphs.

Ralphs could have been successful in NorCal had they priced properly. Ralphs chose to price higher than Safeway and Raleys, of course they failed in the market. Even though back then Ralphs ran excellent operations (sparkling clean stores, excellent perishables, well staffed) the pricing was so out of whack for the market it completely turned away customers.

So this also raises the question why does Kroger want to acquire Safeway which gives them a ton of Ralphs-like stores all over the west/mid atlantic. It doesn't make sense. Operating that type of store is not Kroger's best ability. It seems to be their worst.

Ralphs constantly remodeling stores?

IDK..................it does not feel like they do that. When I worked for them they were closing stores. After that, I did not experience lots of remodeling in the Palms Springs area, San Diego area and moving back to the Los Angeles area.............the stores look almost exactly as they did in 2002.

[ClownLoach]

Stater of course is doing better. Stater keeps opening new stores (closes a store here and there but not many). Stater keeps remodeling stores.

Ralphs doesn't open new stores very often, store remodels are done constantly but the stores often looked better before the remodel than after. There is a ton of new competition opening that picks off Ralphs customers. Most Ralphs do not have a large footprint, fuel offer, pharmacy offer, etc. as standard Kroger stores do. Price structure at Ralphs is noticeably higher than most other Kroger divisions (not as bad as QFC though). It feels like the Kroger programs aren't executed as well and do not work as well at Ralphs as they do at Fred Meyer, Smiths, Frys, etc. due to these limitation with the physical facilities of Ralphs.

Ralphs could have been successful in NorCal had they priced properly. Ralphs chose to price higher than Safeway and Raleys, of course they failed in the market. Even though back then Ralphs ran excellent operations (sparkling clean stores, excellent perishables, well staffed) the pricing was so out of whack for the market it completely turned away customers.

So this also raises the question why does Kroger want to acquire Safeway which gives them a ton of Ralphs-like stores all over the west/mid atlantic. It doesn't make sense. Operating that type of store is not Kroger's best ability. It seems to be their worst.

Ralphs constantly remodeling stores?

IDK..................it does not feel like they do that. When I worked for them they were closing stores. After that, I did not experience lots of remodeling in the Palms Springs area, San Diego area and moving back to the Los Angeles area.............the stores look almost exactly as they did in 2002.

I agree. They haven't really done much real remodeling work since the mid/late 2000s and have closed half the chain. Lots of what should today be good stores that seem to have been closed in an effort to increase short term comps, and obviously at the expense of long term market share. Most of the remodels since then are ready light redecorating, new paint, really cheap graphics that are primarily wallpaper with corrugated cardboard letters, and bad concrete floor conversions. Refrigeration isn't replaced, perimeters aren't moved or upgraded, fixtures aren't replaced either. I've seen Fred Meyer stores that were in solid condition and newer fixtures that have been completely redone from floor to ceiling during the same time frame. I can only think of a few real remodeling efforts that had substantial construction involved, Sports Arena in San Diego which moved, Westwood? Not long ago we were making fun of Albertsons for messing up Safeway lighting but they've mostly gone back and fixed those up, while most Ralphs have very old, ancient 8ft fluorescent strip lights from the 80s with new LED retrofit bulbs with terrible color and glare. Even "Fresh Fare" conversions amount to only new wall decor, and the newest version is old dirty reclaimed barnwood screwed into the walls with stencil type paint like you'd see at a mom and pop in the sticks somewhere... Looks like a lower end store not higher end (Foothill Ranch, Laguna Niguel).

To prove how badly they neglect stores now, my local Ralphs which performs relatively well in a sea of Albertsons and Staters had a fire in the deli 6 months ago. Their old chicken roasting machine (non rotisserie vertical roaster) caught on fire inside. The store was closed for half a day. It took them months to replace with a new machine with self cleaning like a dishwasher, they just had the burned machine repaired to limp along while they waited. And the smoke damage on the soffit ceiling over the deli still has not been repainted! It is a store that theoretically should have decent concrete underneath but they replaced the floor with linoleum and vinyl plank, and recently they replaced areas of loose or cracked tile with completely different colors that look like they just shopped the Home Depot clearance aisle (light blonde wood instead of dark brown). No way this would be a divest in the merger either.

[jamcool]

It would be the second time Kroger would get out of SoCal if they got rid of Ralphs. They owned Market Basket until the 80s-about the time of the merger with Dillon.

Stater of course is doing better. Stater keeps opening new stores (closes a store here and there but not many). Stater keeps remodeling stores.

Ralphs doesn't open new stores very often, store remodels are done constantly but the stores often looked better before the remodel than after. There is a ton of new competition opening that picks off Ralphs customers. Most Ralphs do not have a large footprint, fuel offer, pharmacy offer, etc. as standard Kroger stores do. Price structure at Ralphs is noticeably higher than most other Kroger divisions (not as bad as QFC though). It feels like the Kroger programs aren't executed as well and do not work as well at Ralphs as they do at Fred Meyer, Smiths, Frys, etc. due to these limitation with the physical facilities of Ralphs.

Ralphs could have been successful in NorCal had they priced properly. Ralphs chose to price higher than Safeway and Raleys, of course they failed in the market. Even though back then Ralphs ran excellent operations (sparkling clean stores, excellent perishables, well staffed) the pricing was so out of whack for the market it completely turned away customers.

So this also raises the question why does Kroger want to acquire Safeway which gives them a ton of Ralphs-like stores all over the west/mid atlantic. It doesn't make sense. Operating that type of store is not Kroger's best ability. It seems to be their worst.

Well I never thought we would all say it, but maybe you have the reason for the acquisition. The Safeway/Albertsons people are better at running these smaller size stores than Kroger. And at the same time there isn't space for Kroger size big stores all over the country; they're lucky Fred Meyer was around to get big boxes in the PNW and even then I think they ran better before the acquisition. If they want to penetrate these markets where real estate costs prevent 100K stores with big parking lots and fuel stations then they need to plop down an Albertsons size store and right now they don't have a viable format that performs well in that size. The two groups most similar are Ralphs and QFC which are as you said the worst run parts of Kroger today.

I really think if they were allowed to merge, which continues to look cloudy, they would best put the Safeway/Albertsons people in charge of the entire Ralphs division and eventually remodel the Ralphs stores into the Safeway/Albertsons format. This seems to be the size and format that works well in the Coastal markets while the larger Kroger formats work in the rest of the country. Every indication recently has been that they would not necessarily unify the banners or formats but this would be a good relaunch of the Ralphs brand with the cleaned up, easier to shop Albertsons/Safeway format with a decent racetrack around the perimeter and no clutter of random fixtures or pallets of junk that block the aisles. I do think there was tremendous monetary value to the "legendary" Ralphs banner even though it's a shadow of itself otherwise it might have made more sense to offload that name to C&S. Really becoming curious as to what are the few (60 something?) stores they planned to sell to C&S and how many are Ralphs vs a Safeway/Albertsons banner. I can think of many close overlaps, which would be the only stores likely sold in the current limited count, where they'd probably be better off unloading the Ralphs unit. Maybe some of the LA big volume stores would be kept over a nearby Vons since many of those are in worse shape but I can think of cases where the Ralphs probably underperforms to an Albertsons around the corner. A decade ago that Ralphs would probably have run circles around the Albertsons.

Knowing the shrink problems and labor costs in LA, and seeing the fact the banner has effectively lost 2/3rds of its volume, I wonder how viable Ralphs really is now and worse how many good units exist to just prop up marginal or break even stores to maintain local buying power and profitability of warehouses/distribution fixed costs. There are definitely some locations that are real gems but I wonder how many at this point, less than 100 for sure. When the last union negotiations were suddenly resolved because Kroger said they would just close the doors at Ralphs if a strike occurred vs hiring scabs, and the underlying message was if the stores closed they might just permanently exit the market, I wonder if that threat was real and not necessarily bluffing? (They could have easily found a C&S type acquirer for SoCal who would have purchased assets after a spinoff which would then BK out of unwanted leases, heck Bodega Latina probably would have taken it and the union would have been SOL)

It's really interesting that the more this merger talk has forced us to scrutinize these chains, the more we are all recognizing the dramatic improvement of the Albertsons banner and how, even though pricing hasn't been their best suit, they are arguably the best operator in the most valuable markets (faster growing, higher income, and lower shrink).

[storewanderer]

Stater of course is doing better. Stater keeps opening new stores (closes a store here and there but not many). Stater keeps remodeling stores.

Ralphs doesn't open new stores very often, store remodels are done constantly but the stores often looked better before the remodel than after. There is a ton of new competition opening that picks off Ralphs customers. Most Ralphs do not have a large footprint, fuel offer, pharmacy offer, etc. as standard Kroger stores do. Price structure at Ralphs is noticeably higher than most other Kroger divisions (not as bad as QFC though). It feels like the Kroger programs aren't executed as well and do not work as well at Ralphs as they do at Fred Meyer, Smiths, Frys, etc. due to these limitation with the physical facilities of Ralphs.

Ralphs could have been successful in NorCal had they priced properly. Ralphs chose to price higher than Safeway and Raleys, of course they failed in the market. Even though back then Ralphs ran excellent operations (sparkling clean stores, excellent perishables, well staffed) the pricing was so out of whack for the market it completely turned away customers.

So this also raises the question why does Kroger want to acquire Safeway which gives them a ton of Ralphs-like stores all over the west/mid atlantic. It doesn't make sense. Operating that type of store is not Kroger's best ability. It seems to be their worst.

Ralphs constantly remodeling stores?

IDK..................it does not feel like they do that. When I worked for them they were closing stores. After that, I did not experience lots of remodeling in the Palms Springs area, San Diego area and moving back to the Los Angeles area.............the stores look almost exactly as they did in 2002.

But I feel like most of the Ralphs I've been to in SoCal in recent years (mostly south bay areas) have been remodeled recently. Every Fresh Fare has the more current Fresh Fare interior. I see few of the 2010 era Kroger interiors (with the wood paneling behind the department names) and a lot of "fresh and local" decor; very few of the 2000's era Ralphs interiors. Even that joke dive store in Menifee was remodeled in the past 5 years (I know it doesn't look good... but it was remodeled...).

Kroger put a ton of money into Ralphs in the late 90's between NorCal, new stores in Bakerfield/Fresno, Palm Springs area, etc. Clearly the ROI on that was very, very bad. So then Ralphs didn't get as much investment after that whole high opportunity but very mis-priced effort got largely shut down (except Palm Springs).

Meanwhile I was shopping in Smiths Stores that had zero investment since Smiths was its own company up until Kroger finally started to throw them some remodel money sometime after 2010. Kroger did build two new Smiths in Reno in the earlier 00's though, both are of that era King Soopers clones.

[ClownLoach]

Stater of course is doing better. Stater keeps opening new stores (closes a store here and there but not many). Stater keeps remodeling stores.

Ralphs doesn't open new stores very often, store remodels are done constantly but the stores often looked better before the remodel than after. There is a ton of new competition opening that picks off Ralphs customers. Most Ralphs do not have a large footprint, fuel offer, pharmacy offer, etc. as standard Kroger stores do. Price structure at Ralphs is noticeably higher than most other Kroger divisions (not as bad as QFC though). It feels like the Kroger programs aren't executed as well and do not work as well at Ralphs as they do at Fred Meyer, Smiths, Frys, etc. due to these limitation with the physical facilities of Ralphs.

Ralphs could have been successful in NorCal had they priced properly. Ralphs chose to price higher than Safeway and Raleys, of course they failed in the market. Even though back then Ralphs ran excellent operations (sparkling clean stores, excellent perishables, well staffed) the pricing was so out of whack for the market it completely turned away customers.

So this also raises the question why does Kroger want to acquire Safeway which gives them a ton of Ralphs-like stores all over the west/mid atlantic. It doesn't make sense. Operating that type of store is not Kroger's best ability. It seems to be their worst.

Ralphs constantly remodeling stores?

IDK..................it does not feel like they do that. When I worked for them they were closing stores. After that, I did not experience lots of remodeling in the Palms Springs area, San Diego area and moving back to the Los Angeles area.............the stores look almost exactly as they did in 2002.

But I feel like most of the Ralphs I've been to in SoCal in recent years (mostly south bay areas) have been remodeled recently. Every Fresh Fare has the more current Fresh Fare interior. I see few of the 2010 era Kroger interiors (with the wood paneling behind the department names) and a lot of "fresh and local" decor; very few of the 2000's era Ralphs interiors. Even that joke dive store in Menifee was remodeled in the past 5 years (I know it doesn't look good... but it was remodeled...).

Kroger put a ton of money into Ralphs in the late 90's between NorCal, new stores in Bakerfield/Fresno, Palm Springs area, etc. Clearly the ROI on that was very, very bad. So then Ralphs didn't get as much investment after that whole high opportunity but very mis-priced effort got largely shut down (except Palm Springs).

Meanwhile I was shopping in Smiths Stores that had zero investment since Smiths was its own company up until Kroger finally started to throw them some remodel money sometime after 2010. Kroger did build two new Smiths in Reno in the earlier 00's though, both are of that era King Soopers clones.

When Ralphs is remodeling from that Kroger decor to the fresh/local decor they aren't really doing anything else that I see. No upgrades occur anywhere on the perimeter; deli and bakery cases stay the same and they're not even changing the tile behind the counters there or in meat. Lighting is dull and outdated in every store. Refrigeration isn't being replaced other than the outside metal trim to change color. They're really just redecorating the walls, replacing aisle hangers, and changing planograms these days but the stores are basically the same place when they're done.

When you say Fresh Fare is the newest decor, do you mean the all brown and white farmhouse style store where they screw recycled wood panels into all the drywall and either paint letters onto it or attach cardboard letters with glue? Because that's the newest Fresh Fare decor I've seen rolling out and it's really ugly to say the least. The only part with any character is produce where the entire wall says "CALIFORNIA" and has pictures of farmers like you'd expect to see at Whole Foods. I've only seen three of the new Fresh Fare decor so far, most are the previous generation which was colorful pastel walls and backlit letters. I did see a store in San Clemente got the same decor as La Jolla; both are the same style as the new Fred Meyer remodels are getting with a lot of hexagonal shapes on the walls.

A remodel that just changes planograms, wall decor, aisle hangers and floor tile in conjunction with light servicing like replacing the bumper panels on refrigerated cases is just a redecorating in my opinion, not an actual remodel. Real remodels take months not weeks. Many of these most recent remodels are nothing more than the Albertsons that are getting that Florida decor, they just scrape all the walls then repaint and attach new graphics, rearrange gondolas only (no perimeter changes. No refrigeration changes. Same checkstands and store fixtures once done).

I am hard pressed to name a real "full remodel" of a Ralphs where real construction occurred (departments moving and expanding, walls opened up, checkouts replaced, refrigeration replaced, new bakery deli or meats, new lighting, etc.) aside from the huge La Jolla store remodel about 5 years ago. For most Ralphs the last real remodel was in conjunction with the 2000's era decor with either the green script letters over wooden "Ralphs" logos or even worse the post Alpha-Beta decor with the white walls and teal "bolted on" letters and smeared wall texture that looked like they prepped the walls for tile and forgot to attach it.

[storewanderer]

When Ralphs is remodeling from that Kroger decor to the fresh/local decor they aren't really doing anything else that I see. No upgrades occur anywhere on the perimeter; deli and bakery cases stay the same and they're not even changing the tile behind the counters there or in meat. Lighting is dull and outdated in every store. Refrigeration isn't being replaced other than the outside metal trim to change color. They're really just redecorating the walls, replacing aisle hangers, and changing planograms these days but the stores are basically the same place when they're done.

When you say Fresh Fare is the newest decor, do you mean the all brown and white farmhouse style store where they screw recycled wood panels into all the drywall and either paint letters onto it or attach cardboard letters with glue? Because that's the newest Fresh Fare decor I've seen rolling out and it's really ugly to say the least. The only part with any character is produce where the entire wall says "CALIFORNIA" and has pictures of farmers like you'd expect to see at Whole Foods. I've only seen three of the new Fresh Fare decor so far, most are the previous generation which was colorful pastel walls and backlit letters. I did see a store in San Clemente got the same decor as La Jolla; both are the same style as the new Fred Meyer remodels are getting with a lot of hexagonal shapes on the walls.

I am hard pressed to name a real "full remodel" of a Ralphs where real construction occurred (departments moving and expanding, walls opened up, checkouts replaced, refrigeration replaced, new bakery deli or meats, new lighting, etc.) aside from the huge La Jolla store remodel about 5 years ago. For most Ralphs the last real remodel was in conjunction with the 2000's era decor with either the green script letters over wooden "Ralphs" logos or even worse the post Alpha-Beta decor with the white walls and teal "bolted on" letters and smeared wall texture that looked like they prepped the walls for tile and forgot to attach it.

I consider these types of remodels you describe that Ralphs does, where they basically do a (poor) redecoration to the walls, keep old refrigeration, keep old tile behind perimeter departments, and reset the center store to be a "remodel" at this point. This is the type of store remodel that we see Safeway doing all over the place, as well as regionals like Save Mart and Raleys. I did just get one major remodel out of Raleys where they closed a 60's build store that had last been remodeled in the mid 90's and replaced everything but that was the first remodel like that I've seen in 8 years.

I'm a couple decors behind on the Fresh Fare decor. I consider the "initial" Fresh Fare decor to be the one that has no wall letters but instead has product images for the fixtures above each department, basically the early 00's version of it. I don't see any of those left at Ralphs but assume there must be a few (there were still some at QFC and King Soopers the past few years though). The colorful pastel wall Fresh Fare decor was mostly applied in recent years, like 2015 and later.

But you are right they are not doing a thing to add/expand departments or add features in these remodels. And they've already earmarked a bunch of money to do "remodels" to the Albertsons/Safeway units they are purchasing...

[veteran+]

I maintain that the capex in the Coachella Valley was minimal.

They mostly closed stores. The biggest expenditure was the Smoketree Ralphs to Fresh Fare and THAT was a joke.

I have done many remodels in my career and that Smoketree store was a mess. Of course it was a huge improvement from what it was, an Extremely neglected Ralphs (formerly Vons or maybe Safeway?).