This piece ran in today's LA Times:
Albertsons Explores Possible Sale; Its Stock Jumps 11%
The No. 2 supermarket chain has been losing market share. Potential bidders include buyout firms and foreign grocery companies.
By E. Scott Reckard, Times Staff Writer
Albertsons Inc., which had been acquiring other food retailers as competition in the industry increased, may change course and put itself on the auction block.
Albertsons, second in size to Kroger Co. among U.S. grocery chains, said Friday that it hired Goldman, Sachs & Co. and Blackstone Group to explore "alternatives to increase shareholder value, including a possible sale." The company's stock rose $2.32, or 11%, to $23.05 on prospects for a sale, but rating firms said that they might downgrade its bonds.
As I scan the daily news it's items like this that spark my interest. What are we seeing here? The second largest grocery store chain in the US is looking to sell? WTF is this, can't compete with those farmer's markets that charge an arm and a leg for free range kumquats?
The only thing better than owning a grocery store is owning a bank. Why, oh why is the number two grocer in the nation looking to bail, cut and run as it were?
Regular readers will note that I've been saying right along that our nation is being gutted, our economic viability compromised to the point of no return.
Katrina has set in motion economic forces that will cripple the nation. Fuel shortages and the inability to ship our primary export, food, is going to create an economic bonfire the likes of which has never been seen.
Could Albertson's abrupt `about face' be due to the realization that they now have too many stores for too few customers?
Traditional grocers like Albertsons have been squeezed by discount-driven Wal-Mart Stores Inc.'s Supercenters and Costco Wholesale Corp. stores even as specialty retailers such as Trader Joe's, Whole Foods Markets Inc. and ethnic grocers chew off small but growing pieces of the market. Albertsons also was hurt by a bitter 4½-month strike and lockout at Southern and Central California supermarkets that ended in February 2004.
"It's a rough business, and Albertsons never seemed to be able to get everything going at the same time," said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp.
Ah ha! It's those damn unions again! The lame ass excuses offered here ignore the fact that most major grocery retailers have a number of stores with no nearby competitors. Personally it's a fifteen-mile trip to the nearest Wal*Mart or Costco where the local supermarket chain (a small, regional player) is only two miles away.
Albertsons, based in Boise, Idaho, operates 2,500 stores in 37 states and has 240,000 employees. In addition to Albertsons markets, its store brands include Sav-on Drugs, Acme, Shaw's, Jewel-Osco, Osco Drug and Star Markets. It also owns Bristol Farms, a high-end market chain in Southern California.
The company said it would have no further comment until its board "has approved a definitive transaction." Executives didn't return calls asking about its current status in the Southern California dogfight with Ralphs and Vons; although it has never been No. 1 in the region, its share of the market has exceeded 20% in Orange, Ventura and San Diego counties.
Analysts said it seemed unlikely that Kroger, Ralphs' Cincinnati-based parent, or No. 3 Safeway Inc. in Pleasanton, Calif., which owns the Vons and Pavilions chains, would bid for Albertsons outright because their stores overlap so much.
Geez, the stores overlap so much...could it be too many stores and too few customers. You can drive for miles and not see a single fast food joint but when you do happen upon one, you find most of their competitors right across the street. Even the big box discount retailers build in each other's backyards, claiming that there's too much competition is a claim that doesn't hold water.
Some speculated that Albertsons might be bought by a private investment firm that would sell it in pieces to smaller chains.
Other potential buyers could include Britain's largest food retailer, Tesco, and Delhaize Group of Belgium, which owns the Food Lion markets in the United States, said bond analyst Pete Hastings at Morgan Keegan in Memphis, Tenn.
Albertsons has grown through acquisitions, including its purchase in the 1990s of American Stores Co., which operated Lucky Stores supermarkets and Sav-on drugstores.
Struggling to recover from the supermarket strike, it has seen revenue and profit increase this year, driven by last year's acquisitions of the Shaw's chain in New England and Bristol Farms, which has 11 stores in Southern California.
However, analysts said the company's underlying sales with or without the Southern California stores were still not as good as its main competitors. Its stock had fallen 13% this year before Friday's announcement that it would explore a sale.
For some bizarre reason stock price and profitability are unrelated. Who cares if their stocks have dropped, they're making money so why sell?
Several bond-rating firms raised red flags about Albertsons debt securities Friday, including Standard & Poor's Ratings Services, which put them on its watch list with negative implications, threatening to downgrade them to junk-bond status because of the company's review of alternatives.
"Although the ultimate outcome of this process is uncertain, these strategic alternatives could potentially weaken bondholder protection measures," said S&P credit analyst Mary Lou Burde.
Yet another stock market mystery for us to puzzle over. Mismanagement can sink the soundest of businesses but is that what we're seeing? The article says profits are up but stock price is down.
Is this a case of unhappy shareowners or is it a thinly disguised effort to bail while the getting is good?
Once again good citizen you will have to rely on your own eyes and ears for the true condition of the economy. The media will report whatever lies Wall Street and the White House dictate.
Even if the fuel situation `stabilizes' (meaning prices stay where they are right now) the ripple effect of the added cost of doing business is going to inflict some heavy duty losses on the job front as businesses fight to maintain ROI for their greedy shareowners.
CEO's that don't produce profits don't keep their jobs very long.
Thus it can be said that private enterprise does not serve the interests of society but that of it's shareowners, society can go suck rocks!
Could this outlook be what lies underneath the attitude that people who can't afford your products (because they're poor) are worthless?
No human is any more or less worthwhile than any other. We only have those who think they are better than others. A belief based on the notion that those cut adrift by society are somehow deficient when the truth is commerce is incapable of profitably employing them, so these self professed `betters', the employer class, turns the `surplus population' society's problem while labeling them scum.
Now do you think it's time to put an end to private enterprise? No one should have to go begging for the opportunity to participate in the society that gave birth to them. No one should have their livelihood stripped from them for the sake of increasing returns for the shareowners. Any society that cannot provide a way for all of its member to participate EQUALLY in that society is unjust!
So Albertson's is looking to sell. What do you make of that?
Thanks for letting me inside your head,
Gegner
