Once again, I am happy share comments from the leading retail analyst in the USA, Karen Short. Karen and I have teamed up to provide commentary about Target and Kroger. We teamed up again to comment on Albertsons Companies. Our opinions are similar.
Below is Karen’s letter:
Dear Albertsons,
Kroger + Albertsons was DOA, and Albertsons has been in no-man’s-land for years. Here are my views on what is not working, as well as what the fixes are to create shareholder value.
What’s not working:
1️⃣. Reducing 11 divisions to 4 regions does nothing to address Albertsons core issues.
2️⃣. Albertson’s primary competitors are Walmart, Costco, Aldi, Kroger and Trader Joes. As you stagnate as an entity, they get stronger.
3️⃣. Albertsons cannot rely on real estate locations to validate your existence.
4️⃣. Albertsons should focus on remodeling stores and be very surgical when it comes to opening new stores.
5️⃣. Albertsons needs to sell or divest most of their East Coast stores. There is no logic for operating 22+ banners when arguably only 5 have true brand presence.
6️⃣. Albertsons should not buy back their stock.
My suggestions:
1️⃣. With the reduction of 11 divisions to 4 regions – use this opportunity to consolidate banners.
2️⃣. Merge with Ahold Delhaize USA.
3️⃣. Divest Tom Thumb’s 70 stores and Randalls 25 stores in Texas, but retain the 115 United Family stores which includes Market Street.
4️⃣. Monetize the air rights on all owned real estate to build mixed use condo/store locations. This is a proven strategy to generate revenue.
5️⃣. Stop buying back stock as clearly this has not been a good return on investment. Albertsons stock is down 45% in 5 years.
6️⃣. Many of your locations are in regions where there is population decline. If square footage growth exceeds population growth, then Albertsons is losing share. Don’t build in states losing population.
7️⃣. Stop believing your 20% to 40% price gaps to Walmart and other retailers are reasonable. Your price gap to Walmart must be no greater than 5%-8%. Anything wider renders you irrelevant.
8️⃣. Understand the new food pyramid and speak to it through your consumers. Your vendors will not do this for you and your vendors have little to no motivation to reformulate their product.
9️⃣. You must discuss Costco on your earnings calls because by not including Costco, you are deceiving yourself.
Albertsons, you need a more monumental change than ACI Edge. It will not move the needle so do not deceive yourself.
Karen Short
This is Brittain. I wrote and attached an article about Albertsons. I outline why ACI Edge isn’t enough, and that the company must end stock buybacks and suspend the dividend. I also provide in-depth analysis on why Albertsons must hire a new CEO.
#retail #leadership