LOS ANGELES-The supermarket sector here is in flux, and that could cause some shake-ups in current retail locations.
Leading the exodus is British company Tesco, which today announced that it will exit the U.S. market, taking an estimated billion-dollar loss on its efforts to establish its Fresh & Easy chain. Tesco has 200 stores in Arizona, California and Nevada, and the company stated it would attempt to sell those stores.
Also making waves is the sale earlier this year of Albertson's, a major mainstream grocery chain, to Cerberus Capital Management. Just before the sale, Albertson's closed 19 under-performing stores in Southern California.
Continued pressure from competitors, the increasing attraction of warehouse superstores, and the inroads of discount retailers could lead to more consolidations in the market.
Los Angeles is dominated by the Ralph's grocery store chain, with Vons, Super King, Food 4 Less and other big retailers also vying for a share. Costco, Target and Walmart also offer groceries in the region, as do a number of smaller chains and independent stores, creating a lot of consumer shopping choices.
On the horizon, the Batavia, IL-based Aldi USA chain has announced that its goal is to open 100 new stores on the west coast over the next two years, adding further competition in the market. The discount grocer runs smaller square-footage stores than competitors, typically around 10,000 square feet.
Terry Bortnick, president of Argent Retail Advisors, tells GlobeSt.com that the trend in grocery stores will be toward further consolidation. “The major grocers will shed less profitable locations and focus on those locations that have the highest square foot profitability,” says Bortnick.
His Argent Retail Advisors is currently attempting to find a new company to lease a 42,000-square-foot store that formerly housed an Albertson's located in Covina, a city about 25 miles east of downtown Los Angeles. The location, a plaza at the corner of Grand Ave. and Covina Blvd., straddles the intersection of two of that city's biggest streets.
The Covina location's property owners, who were not identified, are hoping another grocery chain can be enticed to take the space, Bortnick says. “The first choice is always to find another grocer, maybe a local grocer, another major that's looking to replace a store. If there's not a grocer, some of the more common users are a health club or another big box retailer. If it's a more regional location, there'd be major discounters or electronics or apparel that would take it. If it's more neighborhood, there's less options.”
Bortnick says such chains as Smart & Final, Whole Foods, Sprouts and a number of Hispanic and Asian supermarkets catering to those ethnic niches are viable prospects for his Covina location. “There's always a crop of new and fresh retailers coming around.”
As reported earlier on GlobeSt.com, the Albertson's locations have been in play for some time. Last year, a Glendora, CA. mall that housed an Albertson's and Ace Hardware was sold.
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