One Quick Link and Thought

Yesterday I didn't post because I am preparing for our annual camping trip and spent much of the day contributing to a full-employment economy by shopping for food and other necessities. I do have an eye on the news, however, and the AZ Republic has another article today on the Albertson's issue. (I noticed a spike in readership of The Front Porch as this discussion started, from states all across the nation, so I suppose many more folks are interested than just us folks in Morrison Ranch.) Today's business section says that Albertson's isn't interested in closing all the AZ stores:

Albertsons LLC will close nine under-performing supermarkets in Arizona in early August, but a company official said the chain is not leaving the state.

"We see a tremendous value in the Albertsons name," said Bob Colgrove, president of Albertsons Southwest division in Tolleson. "We have no intention in relieving ourselves."

The article then goes on to present the evidence that contradicts that statement somewhat:

The supermarket chain has not opened a new store in the Valley in more than two years, while other food retailers, including Wal-Mart, Fry's Food Stores, Bashas' and Safeway have expanded in the state. Albertsons is the fourth-largest grocery store in metropolitan Phoenix, with 10.9 percent market share, according to Metro Market Studies in Tucson.

But the grocer's pause in development has made some wonder whether the company would check out of Arizona.

Once again I will disclaim any insider knowledge; I get my information from reading reports around the country, just like everyone else. Albertson's has not made any special efforts to inform us or our partners of their corporate philosophies - and why should they, frankly; we are one store among many, and they pay their lease faithfully - so my musings here are my own. The key paragraph in this article is the short one farther down:

The decision to sell the supermarkets came after a consortium of investors, including Cerberus Capital Management, bought Albertsons stores in Arizona and elsewhere.

This is a point that the original articles in the Republic didn't specify and I chose not to highlight at the time; Cerberus is not a grocery retailer, like Supervalu, which is the company that bought most of Albertson's. Cerberus is interested in land values; they are the partner that bought the underperforming stores, which were mostly in Arizona. It seems only logical, no, it seems like good business, to recoup their investment by doing what they do, which is marketing real estate.

To broaden our viewpoint, let's summarize the chain of events. Albertson's was not doing great in Arizona. They were number 4 out of the big 4 grocers, as the paragraph above asserts. They were not doing great across the U.S. as well. They tried to make some adjustments, but ultimately decided to take radical action. They put themselves up for sale, nationwide. A consortium of investors bought them, including a grocer, a real estate investment trust, and a drugstore chain; and then these partners divvied up the various stores according to their interests. The grocer, Supervalu, took the best performing stores and will continue operating them as grocery stores. The drugstore chain took the Osco's. And the real estate investment trust took the underperforming stores that were sitting on valuable land. So now, the folks making the decisions about various stores are completely different players than the ones that decided not to open any more stores in Arizona (I believe that our Lakeview Village site was in fact the last new Albertson's opened in the state). So when any news article talks about "Albertson's made this decision two years ago" and then "Albertson's is making this decision now" we are talking about two completely different sets of people making decisions.

The thing that is different about our Albertson's is that they don't own the real estate, and therefore cannot actually sell the site. Rumors have abounded about "what will happen" next - just ask your neighbor what the clerk at the store told HIS neighbor, and then do it again for a different answer - but one statement of fact is that Cerberus will not be selling the real estate at Lakeview Village. However, I DID hear from the bagger in the checkout line... oh, never mind.