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State Of The West: Region Marked By Shakeup In 2013

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Last updated on February 20th, 2014 at 03:16 pm

A number of big stories came out of the western states in 2013. Many of them involved companies having to regroup and/or sell off their holdings, but there were a couple of bright spots as well, including new banners and strong performance.

Below are the top 10 most noteworthy as reported by The Shelby Report of the West this year.

1. Fresh & Easy finds a buyer

Fresh & Easy Neighborhood Market, a U.S. company launched in 2007 by British parent Tesco, agreed in September to sell approximately 150 of its 167 stores, as well as its Riverside distribution and production facilities, to YFE Holdings Inc., an affiliate of investor Ron Burkle’s Yucaipa Cos. LLC. Though Yucaipa was expected to have the lead bid on the 150 stores, according to reports, court procedures dictated that the chain go to auction Nov. 19. All potential buyers had to submit offers by Nov. 15.

Under the proposed Yucaipa deal, a Tesco affiliate would lend the Yucaipa unit $120 million to help fund the acquisition, according to court papers. Tesco would get warrants to buy as much as 10 percent of the equity in the reorganized chain. Fresh & Easy would get 22.5 percent of the equity in the reorganized chain if the Yucaipa affiliate’s offer prevails. The Yucaipa buyer also has offered to take on some of Fresh & Easy’s liabilities. The liabilities are valued at about $130 million, in court papers, and may exceed $200 million.

All this followed months of speculation about the fate of the unprofitable chain of small-sized food markets operating in Southern California, Arizona and Nevada. About 4,000 employees will transfer to the new business. That leaves about 1,000 people without jobs, as Fresh & Easy employed 5,000 when it operated 200 stores.

Fresh & Easy said it owes $738 million to Cheshunt, England-based Tesco, the U.K.’s biggest retailer. The unit never made a profit and lost an average of $22 million a month in the 12 months ended in February, according to court papers.

The supermarket chain sought bankruptcy protection Sept. 30, listing debt of as much as $1 billion and assets of as much as $500 million in a court filing.

2. Kroger continues to lead as nation’s traditional supermarket

The Kroger Co., which operates numerous banners across the U.S., continued to post positive results in 2013. Its latest report posted in mid-September for the second quarter of fiscal 2013, showed identical supermarket sales growth, without fuel, of 3.3 percent. It marked the Cincinnati-based company’s 39th consecutive quarter of positive ID sales.

“Kroger’s strong second quarter results have us on target to deliver the earnings per share growth we promised for the year,” David B. Dillon, Kroger’s chairman and CEO, said then. “As we have shown quarter after quarter, our consistent execution of the Customer 1st Strategy deepens customer loyalty, increases sales and creates sustainable shareholder value.”

Other items of interest in the company’s second quarter included:

• Total sales increased 4.6 percent to $22.7 billion in the second quarter compared with $21.7 billion for the same period last year. Total sales, excluding fuel, increased 3.9 percent in the second quarter over the same period last year; and

• Net earnings for the second quarter totaled $317 million. Net earnings for the second quarter last year were $279 million.

3. Supervalu sells five banners to Cerberus affiliate

Supervalu in January announced that it would sell five of its retail banners—Albertsons, Acme, Jewel-Osco, Shaw’s and Star market—to AB Acquisition LLC, an affiliate of Cerberus Capital Management. The deal closed in March and gave AB Acquisition 877 stores—421 Albertsons, 112 Acmes, 166 Shaw’s and Star Markets, and 178 Jewel-Oscos (including any related Osco and Sav-on in-store pharmacies); the transaction was valued at $3.3 billion consisting of $100 million in cash plus the assumption of approximately $3.2 billion in debt.

Supervalu retained 191 stores under the regional banners it kept—Cub (42 stores), Farm Fresh (43), Shoppers (56), Shop n’Save (44) and Hornbacher’s (5). It also kept its Save-A-Lot stores, about 1,300, as well as its wholesale distribution business, which in March served about 1,950 stores.

4. Pro’s Ranch files for Chapter 11 reorganization

Pro’s Ranch Markets filed for Chapter 11 business reorganization at the end of May, citing the lingering recession as a major factor. The company, owned by the Provenzano family, announced then that it plans to continue to operate its 11 Pro’s Ranch Markets in Arizona, New Mexico and Texas during the ­reorganization process.

“The company’s short-term plan is to emerge from Chapter 11 as soon as possible, and over the next few months we will be laying out our long-term strategy to ensure success,” said company CFO Michael Provenzano Jr., son of Pro’s Ranch founder Mike Provenzano Sr.

The majority of Pro’s Ranch stores—seven—are in Arizona, all in the Phoenix area. Two each operate in New Mexico (Albuquerque and Las Cruces) and Texas (both in El Paso). Company holdings also include a gas station, three laundromats, an 80,000-s.f. corporate office and warehouse in California, and a 151,000-s.f. warehouse in Phoenix.

Pro’s Ranch Markets are largely merchandised to the Hispanic shopper, carrying many items from Mexico and Central America.

5. Industry veteran debuts healthy c-store grocery concept in Portland area

Lisa Sedlar, former CEO of New Seasons Market, rolled out in October the first in a chain of healthy convenience stores. Green Zebra Grocery opened its first location Oct. 8 at 3011 N. Lombard St. in Kenton, Ore. The chain of small-form groceries is positioned around high-quality and sustainably produced foods.

Sedlar intends to open additional locations on Southeast Division Street and on Southeast Woodstock Boulevard, with more locations in the pipeline.

6. Aldi plans regional headquarters in California’s Moreno Valley

Discount grocer Aldi said in late June that it is in discussions about a potential warehouse in Moreno Valley, Calif., and acknowledged that it is “further developing plans to expand to Southern California.”

According to reports, Aldi is looking at a 935,000-s.f. warehouse and office suite in West Ridge Industrial Park that it hopes to occupy by summer 2014. About $55 million is expected to be invested in the complex, which would create several hundred jobs.

Aldi currently has more than 1,200 stores in 32 states, primarily from Kansas over to the East Coast. California would represent a new market for the company, which took its first steps westward when it opened nine stores in the Houston, Texas, market in April 2013.

7. Arden Group explores possible sale of Gelson’s

The parent company of Gelson’s Markets acknowledged in mid-July that it is exploring its business options. Los Angeles-based Arden Group said in a statement that its board has “initiated a process to explore and evaluate strategic alternatives, which may include a possible sale of the company.” The supermarket chain said then that it hasn’t made a decision to pursue any specific moves and said it has “no defined timeline” for its evaluation.

Arden’s 16 Gelson’s Markets operate across Southern California. Though Gelson’s closed its store in Pasadena in mid-June, the company opened a new store in Long Beach on Nov. 7 and expects to open a new store in La Canada Flintridge in early 2014.

8. Store closures dominate Haggen chain in 2013

The Haggen grocery chain said in mid-October that it will close three more stores in Washington.

The Bellingham, Wash.-based grocer said then that the stores will shutter its TOP Food & Drug stores in Kent, Auburn and Yakima probably within three months.

Earlier this year Haggen announced plans to close TOP stores in Tacoma, Lacey, Federal Way, Bellevue and Shoreline. The company said the closures are part of a long-term plan to improve competitiveness,

Haggen currently operates more than 20 stores in Washington and Oregon under the Haggen Northwest Fresh and TOP Food & Drug names.

9. Bristol Farms opens newest store in Santa Monica

A Southern California favorite, Bristol Farms opened its latest store in Santa Monica on Aug. 21 in a former Albertsons at 3105 Wilshire Blvd. The 30,000-s.f. store is the Carson, Calif.-based specialty grocer’s 13th location and, as CEO Kevin Davis told The Shelby Report during the grand opening, it “really competes with everybody and really can’t be matched by anyone.”

In addition to ample parking (a treat in SoCal), the store boasts an assortment of foods and goods, including a “food court,” Starbucks coffee bar as well as the largest wine, beer and floral departments of any Bristol store, among other features.

The Santa Monica store employs 150 people.

10. Independent grocers in the West generate $33.2 billion in sales annually

The National Grocers Association (NGA), with support from its Grocers Research & Education Foundation, as well as sponsorship from Mondelez International, Nielsen and The Shelby Report, released in April the findings of its “Independent Grocers Impact America” study. A key finding: the independent grocery channel is responsible for about 1 percent of America’s economy.

In the West, specifically, independent grocers provide 178,335 direct jobs, along with $6.4 billion in direct wages. Western grocers do $33.2 billion in sales annually and pay approximately $6 billion in taxes. In terms of sales, California brings in the most with $19.7 billion each year, followed by Arizona ($3.6 billion) and Washington State ($3.2 billion). Go here to learn more.

Check out the December print edition of The Shelby Report of the West to also read about the leadership changes that have dominated the industry news over the past year.


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