Most are near Wal-Marts

11:33 PM CDT on Tuesday, June 6, 2006

By MARIA HALKIAS / The Dallas Morning News

The new owner of Albertsons stores in Dallas-Fort Worth and other markets is ceding some ground in the fiercely competitive battle for grocery dollars.

Albertsons LLC – formed this month after the split sale of the then-No. 4 U.S. grocery chain – said Tuesday that it's closing 11 unprofitable stores in Dallas-Fort Worth and 19 others in Texas, Oklahoma and Louisiana. Stores in four other divisions from Northern California to Florida were also learning of closings Tuesday.

By August, Albertsons will shutter four stores in Plano, two in North Dallas and one each in Frisco, Carrollton, Lewisville, DeSoto and Dallas near Duncanville.

The company wants to focus on locations that can be turned around, division president Williams Emmons said Tuesday.

"The decision to close these stores was made to make the rest of the stores healthier," Mr. Emmons said. "It was a tough decision for me because some of these underperforming stores were hot spots for us, but neighborhoods change."

In the 1990s, when Albertsons was aggressively gaining market share, it was often the lone supermarket in a suburban area where housing developments were just getting started.

"Albertsons pioneered the green real estate market in the 1990s and took strategic positions. They were visionaries in picking locations and watching the market grow up around them," said Brian Glaser, president of the Dallas commercial retail division of the Weitzman Group.

"Unfortunately for Albertsons, all their competitors – Kroger, Tom Thumb and Wal-Mart – came in sometimes across the street and did it better," he said.

"Sometimes it's the second guys who come in that end up winning."

Most of the area stores slated for closure are in direct competition with Wal-Mart Supercenters, including two that recently opened along the Dallas North Tollway in North Dallas and Plano. Another is on Forest Lane in Lake Highlands, across LBJ Freeway from a Wal-Mart Supercenter under construction.

Wal-Mart Stores Inc. has the highest concentration of stores in D-FW, with more than 100 Supercenters, Neighborhood Markets and Sam's Clubs.

"The metroplex remains one of the most competitive grocery markets in the nation. Customers here have many choices available to them," said Wal-Mart spokesman August Whitcomb. "If we're fortunate enough to have new customers try us for their grocery needs, we'll do our best to win them over with everyday low prices and one-stop shopping convenience."

Albertsons shareholders "blinked first," said Edward J. Fox, director of the J.C. Penney Center for Retail Excellence at Southern Methodist University's Cox School of Business. "The company is ceding where some of the competition has been the hardest."

Conventional supermarkets don't necessarily lose customers, but their customers historically spend less with them when a Supercenter opens nearby, Mr. Fox said.

"Studies have shown that if it opens right across the street, a conventional supermarket's sales will decline 17 percent."

Mr. Glaser praised Kroger and Tom Thumb for improving their stores while Wal-Mart and specialty food chains including Whole Foods and Central Market, among others, expanded here, too. "Albertsons was lacking, and the customer turned to their competitors," he said.

Albertsons plans to be aggressive in its turnaround, Mr. Emmons said. "The consumer wants more fresh items and services, and these are opportunities for us," he said.

This is Mr. Emmons' second stint working for Albertsons in the Dallas market. He was here in 2001 when the chain had the largest market share of any grocer. It was dethroned in 2003 by Wal-Mart, which continues to have a dominant market share of about 30 percent.

"We don't look at dominance. We think every competitor is a factor," Mr. Emmons said.

He said store morale has improved in recent weeks as employees learned that the new management wants to turn the company around, he said.

Each store to be closed employs about 100 people, and they will be offered jobs at other Albertsons locations, Mr. Emmons said.

"At one time we were the employer of choice in this market, and we want to try to do that again," he said.

The stores set for closure in Texas, Oklahoma and Louisiana have been unprofitable for years. While they comprise 16 percent of Albertsons' three-state region, they have accounted for only 9 percent of sales, Mr. Emmons said.

Among them are 10 stores in Austin and five in Oklahoma. The Fort Worth-based division will have 158 Albertsons locations when the 30 stores close.

The decision is the first from the new owner since Albertsons Inc. agreed in January to be sold in three pieces. Shareholders approved the deal last week.

The Texas stores became part of Albertsons LLC, which is owned by investors led by private equity firm Cerberus Capital Management and Kimco Realty.

This group acquired 661 stores in unprofitable markets. The new company would rank in the Top 20 of U.S. supermarket operators, with estimated sales of about $10 billion.

Supervalu Inc. and CVS Corp. acquired the rest of the company.

E-mail mhalkias@dallasnews.com

Founded: June 2006*

Headquarters: Boise, Idaho

Division headquarters: Fort Worth

Owners: Cerberus Capital Management, Kimco Realty, Schottenstein Stores Corp., Lubert-Adler Partners and Klaff Realty LP

Chief executive: Robert Miller

D-FW division president: William Emmons

2005 revenue: $10 billion (estimate)

Employees: 78,000; 11,000 in D-FW

Number of stores: 661; 102 in D-FW

States of operation: Arizona, California, Colorado, Florida, Louisiana, Nebraska, New Mexico, Oklahoma, Texas, South Dakota and Wyoming

Other operations: Extreme Inc., a wholly owned subsidiary operating 27 Super Saver stores in four states, including 11 in Texas

*Formed when No. 4 U.S. supermarket chain Albertsons Inc. was split into three pieces and sold separately

SOURCE: Albertsons LLC