Safeway’s sales “exploration” process involving its struggling Genuardi’s unit will reportedly lead to a deal with several retailers in the near future, according to multiple sources.
As first reported in the August issue of Food Trade News, Safeway has been looking for potential buyers for its 32 Delaware Valley stores whose performances have consistently declined since the Pleasanton. CA chain acquired the company from the Genuardi family in early 2001. When we reported on this story two months ago, a spokesperson for Safeway would not comment specifically on the store sale speculation, but did say, “We are constantly viewing all aspects of our operations so that we can provide our shareholder’s maximum value.”
In recent weeks, sources have told us that activity has heated up, with prospective buyers visiting stores and Safeway performing equipment and inventory audits.
“It’s just a matter of time,” said an independent retailer who claims to have visited at least one Genuardi’s unit in the past six weeks. “It’s been a struggle almost from day one for Safeway. They blew up what was once a great regional merchant and now, with Philadelphia being one of the most competitive markets in the country, sales are unlikely to improve without significant capital investment.”
According to our sources, a deal could be completed within the next six weeks, but more likely before the end of the year.
“Safeway needs to get this done before a potential A&P (Super Fresh and Pathmark) auction occurs,” said another retail executive, who claimed familiarity with the potential sales opportunity. “It’s also logical that Supervalu will put more Acmes on the block at some point in 2012. That could lead to having more than 100 stores in the Delaware Valley up for grabs. By acting first and having the advantage of being non-union, Safeway would seem to have some leverage in this situation.”
But exactly how much clout would Safeway have considering the chain has closed or sold nine stores over the past decade (five in the past year including its Eagleville, PA unit on October 8) and competing retailers have stated that the some of the stores are too small or have unfavorable leases.
At the head of any speculative list is Giant. There have been many reports in recent weeks that the Carlisle based unit of Ahold USA could be interested in as many as 18 of the stores (Giant acquired two former Genuardi’s stores earlier this year in Feasterville, PA and Warrington, PA).
According to several other sources, another list with seven stores has been in play for independent retailers (through their wholesalers) to examine. Other potentially interested operators who fit the non-union profile include Weis Markets and Delhaize America (Bottom Dollar Foods).
The numbers substantiate Genuardi’s decline. When Safeway completed the deal in February 2001 for a reported $600 million, the Plymouth Meeting, PA regional chain amassed sales of approximately $1.06 billion at its 40 stores. It controlled 6.96 percent of the Del-Val market at the time.
Today, there are 28 stores trading under the Genuardi’s banner (two former Genuardi’s units in New Castle County, DE were switched to the Safeway banner a few years ago). Annual sales at those stores are approximately $765 million, or 3.89 percent of the market.