Retail News: The Impact of the Two Randalls on the Kroger-Albertsons Merger List

The Randalls at Memorial and Dairy Ashford is one of the two area locations that could potentially be divested.

The internet has been abuzz the past week with the release of the proposed sell-off by Kroger and Albertsons in preparation for their planned merger. I won’t bury the lead, but this is all contingent on the merger occurring, and we’ll expand on that in a bit. Houston makes out like a bandit compared to other cities. Of the 28 divested locations in Texas, only two in the Houston area will be separated from the fate of the other Randalls. The two Randalls on the list are 14610 Memorial Dr, Houston, TX 77079, a former Handy Andy featured on HHR, and 2931 Central City Blvd, Galveston, TX 77551. Galveston has also been featured on HHR, and both have historically been good locations for Randalls. The other 26 stores on the divestiture list in Texas are Tom Thumb, Albertsons, and Market Street locations throughout DFW. These locations are part of a list of 579 stores the companies plan to sell to C&S Wholesale Grocers to help advance their planned merger. Their plan also involves moving the current Albertsons COO to C&S and allowing them to use specific Albertsons names and brands in certain states. The sale would also include six distribution centers and one dairy plant to C&S, which currently operates only 23 Grand Union stores, and one pharmacy counter in New England. This size mismatch is one factor that fuels the FTC’s concern that C&S may not be properly able to operate as a chain of this size. Many point to memories of Haggen, a chain Albertsons dumped way too many stores on during its merger with Safeway and eventually reacquired. At this point, the merger still seems up in the air, with the FTC and multiple state attorney generals filing lawsuits to try and prevent the combination. It should be remembered that even if the merger progresses, the chances of losing Randalls are slim. The most realistic scenario right now is the continued existence of Randalls as a nameplate for Kroger.

So, what happens in Texas if the merger goes through?

In Texas, C&S has no agreement to use Albertsons’ names (including Randalls/Tom Thumb) or brands, so the stores would likely have to be converted to another banner. In our general region, two Albertsons in Louisiana (Shreveport and Lake Charles) are also on the list, making for a tidy 30 stores across East Texas and Western Louisiana, which C&S can choose to keep together as a chain if they build a brand. All are within existing C&S service areas and have recently appeared on several filings together. C&S has alluded to the fact that they don’t plan to close any stores; however, in my opinion, we may find them forced to backtrack on this to some extent. One possibility could be the return of Piggly Wiggly to the Houston area. C&S is the owner and licensor of the brand and usually seems to reserve Piggly Wiggly for smaller operators who only have a few stores. In fact, three former Save-A-Lot stores in North Texas swapped to Piggly Wiggly late last year, with C&S hinting that there could be future expansion in the state. Now this could all change if the stores in our area can be put on the market. If C&S can lease or sell these locations, then it is very likely that Houston will not be part of any chain plans. It’s important to consider these locations, which were likely not chosen based on performance but instead selected because they were the two Houston area locations closest to a Kroger, without any meaningful competition. We have a few operators, such as Food Town, who would likely thrive in this environment. HEB/Joe V’s could be another potential candidate for both stores. HEB closed its memorial store a few years ago, making it into Houston’s first online grocery hub, in a concept the company dubs EFCs. While the Memorial store could likely be torn down and rebuilt to suit HEB’s needs, Galveston would present a larger challenge, as it is attached to a strip center. In this case, it’s not unreasonable that the store could be reopened as a new Joe V’s, similar to the recent opening of a location in Dallas in a former Albertsons.

So, what happens if the merger doesn’t go through?

Well Dude, we just don’t know. The easy answer to this is that everything “stays the same,” and Kroger and Albertsons continue their separate operations. Realistically, though, Albertsons seems ready for some type of change, and, likely, they likely won’t abandon their plans full stock unless forced to by the courts. One popular theory making the rounds is that in the wake of a failed merger, we may Albertsons sell off divisions to try and raise cash reserves. Based on the slim trimming in Texas compared to most other overlapping divisions, it seems unlikely that Albertsons will want to dump the Lone Star state again. Still, in my research of Safeway’s Houston division, many people were overly optimistic that Safeway would never leave Houston, yet we ended up with AppleTree. Realistically, if Albertsons were to sell off Houston or DFW, it would likely be in one large chunk, not on a store-by-store basis. At the moment, we just have to play the waiting game and see what comes through the courts. They will likely significantly influence any plans for merger or otherwise. In the meantime, we’ll have another guest post coming up Friday, this time covering the history of Safeway and Randalls linking up in the first place, be sure to read it!

6 comments

  1. I’m surprised that the Randalls on Westheimer and Gessner isn’t on this list,\ because just down the road on Westheimer and Elmside is a Kroger.

  2. I’m not sure if I’m following this exactly….if the merger goes through, what happens exactly? Albertertson’s returns to South Texas? Kroger appears again in North Texas? How is Randall’s involved? Are any of those even still open?

    1. Randalls operates 26 locations throughout Houston, Galveston and Austin. They are owned by Albertsons, after being purchased by Safeway years ago. Kroger, who never left DFW, wants to merger with Albertsons, and the companies are suggesting they’ll sell some locations to help the merger. It is unlikely Albertsons will return to South Texas.

  3. I suspect that Kroger really would have preferred keeping the Memorial & DA Handy Randy rather than their neighboring Kroger Superstore I, but since Kroger isn’t really divesting any of their own locations in this region, they probably didn’t have a choice but to divest the Albertsons-owned location. It is also hard to say which location has more favorable lease terms.

    For many reasons, I’m rather skeptical that the courts will allow the Kroger-Albertsons merger to continue. Even if the merger is successfully blocked, it is hard to predict what the future will be for Albertsons. The private equity behind Albertsons seems committed to selling their ownership of the company even though the company continues to do well financially and predictions of the grocery sector tanking post-Covid lockdown era have been proven to be exceptionally false. Is the merger or non-merger better for the future of Randall’s? That really isn’t an easy answer to predict. But, again, I really don’t think the merger will be approved so I’m not taking the whole divestiture plan too seriously at this point.

    Back to the point about prognostications of a supermarket industry slump being proven wrong, it is quite sad how little interest there is in investing in mid-tier supermarkets even though companies like Kroger and Albertsons are doing well for their shareholders. C&S’s offer is really quite laughable, but it seems possible it was the best, or only, semi-credible offer they were given or else surely Kroger certainly would have picked another plan which would have had an easier time getting approved.

  4. I’m surprised the Randalls in Meyer Park (4800 W Bellfort) isn’t on the list. I’ve seldom seen that store busy enough to justify its existence. By contrast, the Kroger on the other side of S. Post Oak is thriving, though it could be nicer.

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