Albertsons LLC, the supermarket chain partly controlled by private-equity firm Cerberus Capital Management LP, plans to close 100 stores, or about 16 percent of its locations, because they were unprofitable.
The grocer will shut 37 stores in northern California, 30 in Texas, 16 in Colorado, nine in Arizona and eight in Florida, spokeswoman Stacia Levenfeld said Wednesday. The outlets are expected to be closed by early August.
The new Albertsons LLC was formed by a group including Cerberus, Kimco Realty Corp. and other firms after they agreed in January to buy 661 stores from the former Albertsons Inc. Buyout firms are purchasing retailers for the value of their real estate and to cut their costs and boost their revenue before selling the operations to other companies or offering shares to the public.
"The biggest potential sales benefit from the store closures is Safeway, who holds the leading share positions in the northern California markets where most store closures are slated, although it should also benefit from closures in Colorado and, to a lesser degree, Texas," New York-based Bear Stearns & Co. analyst Robert Summers, who has an "outperform" rating on Safeway Inc., wrote in a note Wednesday.
The investment firms, Supervalu Inc. and CVS Corp. acquired Albertsons Inc. for about $17.4 billion in stock, cash and debt and split the company into three parts.
The Cerberus group's stores, under the Albertsons and Super Saver banners, are mainly located in Dallas/Ft. Worth, northern California, Florida, the Rocky Mountain region and the Southwest. The announcement of the closings of the underperforming stores comes after the deal was completed last week.
Safeway, the third-largest U.S. supermarket chain, may pick up as much as $175 million in sales from the closings, Summers wrote. Kroger Co., the biggest grocery company, is expected to gain as much as $70 million in revenue, mostly in Colorado.
Supervalu, owner of the Save-A-Lot chain, purchased more than 1,100 Albertsons stores to become the second-largest U.S. grocer. CVS Corp., the No. 2 drugstore company, acquired all of Albertsons' 700 standalone drugstores.
The 100 locations being closed accounted for 9.7 percent of sales over the past year, Boise-based Albertson's LLC said.