Meet the new stores; same as the old stores?
Ever since the new and bigger Haggen grocery store chain began unraveling — and by most accounts that was about five minutes after the doors opened — conspiracy theorists have conjectured that this debacle was somebody’s fiendish plan all along.
Either it was the private-equity firm Comvest that bought the stores with no real intention of running a legitimate grocery chain, instead thinking it could do a quick flip of the real estate, or it was Albertsons/Safeway that figured they had a live one upon whom they could unload a lot of stores they didn’t want, then buy some of them back when the inevitable crack-up came.
Those inclined to think in those terms cite as evidence the development this week in which the former Albertsons/Safeway stores in Washington, Oregon, California, Nevada and Arizona were auctioned off in bankruptcy proceedings.
The winning bidder for the majority of those stores (including 12 of 13 in Washington?) Albertsons/Safeway.
That sure seems like a long way around the parking lot to wind up at the same point. One wonders if the signs that used to adorn many of those locations were put in storage for the time when they’d be reattached to the facade.
As fun as constructing such theories can be, they tend to weaken under closer examination.
The real-estate-flip angle is a dubious proposition because in many cases the real estate isn’t Comvest’s to sell. Many of the stores are leased locations, with a developer or property owner holding the land (perhaps the building shell as well). You can sell the furnishings, the inventory and the lease (there may be conditions and limitations on lease transfers, but what landlord is going to turn down the opportunity to fill a big vacant space?). The property, however, is owned by someone else. Furthermore, whatever money is collected from this auction goes first to the creditors and those who are overseeing the bankruptcy proceeding and the auction. Lawyers, you might have heard, aren’t cheap.
As for Albertsons, were executives cackling in their secret lairs over their diabolical plans to sell the stores and then buy them back in a fire sale of sorts? Haggen’s own suit certainly suggests that Albertsons deliberately undermined the stores’ new ownership. But Albertsons isn’t getting these stores back for free. They’ve got tangible costs (putting signs back up) and intangible (getting customers back into the stores). And even if Albertsons executives surmised that Haggen’s ownership was out of its element, they must have been taken aback at how quickly that ownership gave up.
The list of winners in this mess is short — the aforementioned lawyers, and whoever made all the signs for the stores, provided, of course, they got paid up front and are not unsecured creditors. The list of those who lost is much longer — the employees, the creditors, customers, even the private-equity investors through financial and reputational damage, although no one is likely to spare them much sympathy.
This story has a lot longer to run and a lot more distance to cover. What happens to the five stores in Washington — including Tacoma’s on South 38th Street and others in Federal Way, Bremerton and Silverdale — that were not on Friday’s auction results list? And is Haggen serious about the notion it’s floating about selling its supposedly core stores — which is what little of the company remains? How will the suit play out? Will Albertsons keep open the stores it’s buying back? Will it operate both names? (Years ago, when Kroger bought Fred Meyer, which had bought QFC, there was considerable speculation that those stores would all be rebranded as Kroger. So far, hasn’t happened.)
That means the conspiracy theories have lots of mileage left, and who knows, maybe they’ll be proved out. Still, it is more rational to rely, as one commenter mentioned, on an aphorism known as Hanlon’s Razor: “Never attribute to malice that which is adequately explained by stupidity.”
Another puzzle
Speaking of deals that lead to head-scratching, consider Pacific Lutheran University’s decision to sell radio station KPLU-FM (88.5) to the University of Washington for $8 million.
Leaving aside the programming concerns, which are considerable given the station’s focus on jazz and its involvement in the local music scene, the issue for PLU is what it’s giving up in exchange for the money (of which only $7 million is in cash). The station has huge value to the university as a marketing tool. Would people in the region even know there’s a school in Parkland without those reminders? Many wouldn’t.
Is the sale motivated by financial distress, either for the station or the school? The official announcement doesn’t say, but unless there’s imminent peril, KPLU sounds like a great case study for business-school students to take apart and strategize.
And it just so happens that PLU has a business school.
Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. His TNT column normally appears on Sundays. He can be reached at bill.virgin@yahoo.com.
This story was originally published November 13, 2015 at 5:25 AM with the headline "Meet the new stores; same as the old stores?."