The plan represents a complete pullback from southern California, Arizona and Nevada.
Struggling grocer Haggen on Thursday asked a bankruptcy court for permission to close 100 stores, the bulk of its ill-starred bid for a West Coast empire, after failing to find any interested buyers.
The plan represents a complete and rapid pullback from southern California, Arizona and Nevada, where it expanded this year after buying 146 grocery stores from Albertsons and Safeway in the wake of their merger.
The targeted closures will result in thousands of lost jobs, including more than 5,000 in the Southwest, and will leave Haggen with just an enlarged version of its historic Pacific Northwest turf.
A rapid retreat
Original number of stores: 18 stores, including one stand-alone pharmacy, in the Pacific Northwest, devoted to fresh, organic, locally sourced products.
Stores after Albertsons-Safeway deal: 164 stores all over the West Coast, including 146 bought for $300 million
Stores after retreat announced Thursday: 37 grocery stores: 16 of its original stores and 21 locations remaining from the Albertsons acquisition, plus the stand-alone pharmacy.
Source: Haggen, The Seattle Times
California will bear the brunt of the closings, but 14 stores in Washington are on the list, mostly former Albertsons and Safeways in the Puget Sound region. Haggen said in court filings that no third party is likely to make an offer for these stores.
A terse memo given to employees of the Haggen store in Shoreline on Thursday afternoon said that “this store is not part of the ongoing business model,” and that it’s expected to close around Nov. 24. A store employee said the memo was read “verbatim, no emotion, no apology.”
Before its massive expansion, Haggen only had 18 locations, including a stand-alone pharmacy. It went from having about 2,000 employees to nearly 11,000.
Now Haggen will regroup around 37 so-called “core” stores in the Pacific Northwest, consisting of 16 of the original stores and 21 of the stores it acquired. It will also retain a stand-alone pharmacy that was part of its original footprint.
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In a press release, the company said the legacy stores showed strong sales growth in the past year, and the newly acquired stores it’s keeping have “proven successful.” It declined further comment.
Workers at the stores being closed will get a 60-day notice, and all stores will remain open throughout that period, Haggen said, adding that pay and benefits will continue.
Haggen employs some 5,140 people in California, Nevada and Arizona, where it’s closing all of its locations, according to court documents.
It also employs some 3,730 in former Albertsons and Safeway stores in Washington and Oregon.
Haggen said Thursday the Washington stores it wants to close are in Aberdeen, Liberty Lake, Gig Harbor, Port Orchard, Tacoma, Monroe, Silverdale, Burien, Bremerton, Milton, Everett, Shoreline, and Renton (two locations).
Oregon stores slated for closure are in Tigard, Springfield, Baker City, Beaverton, Milwaukie, Sherwood and Ashland.
A union official in Southern California blasted the way Haggen has handled its expansion and withdrawal.
“The way that Haggen and (private equity investor) Comvest went about this entire process is borderline criminal, and hopefully will be investigated thoroughly by the bankruptcy court and somehow made to be held responsible for this,” said Greg Conger, president of the United Food and Commercial Workers International (UFCW) Local 324, which represents 800 Haggen workers in southern California.
A committee of unsecured creditors that includes UFCW and suppliers like Starbucks wants to see the stores offered for sale before they are shuttered.
“We think there could be interest out there for a lot of these stores and are trying to make sure they are marketed on that basis,” said Robert Feinstein, an attorney representing the committee.
A Haggen employee in San Diego said he too hopes some of the stores can be sold. He said Haggen, Albertsons and the antitrust regulator that approved the transaction all share the blame for what happened.
“Shame on them,” he said.
Haggen wants to begin closing the stores as soon as possible because right now those locations are collectively losing $400,000 a day, it said in court documents. The closures would save it nearly $60 million for the remainder of the year.
The liquidation, which involves the sale of all inventory, property and furnishings in the stores, would raise $125.6 million, “a necessary and significant cash infusion” as it struggles to pay its debt.
Haggen on Thursday also asked the court to authorize retention payments averaging about $7,000 to 231 key employees, including store and pharmacy managers, so they stay through the closings and oversee an overly wind-down.
Haggen bills itself as a purveyor of organic and locally-sourced goods, and the Federal Trade Commission, which oversees anti-trust regulation, thought it could be a good fit to keep competition alive in areas where the merger between Albertsons and Safeway might make the combined company too powerful.
But the unravelling was unprecedentedly quick. Haggen seemingly failed to take even in high-income areas, as shoppers were turned off by what they considered high prices and complained about the lack of flyers and other advertising.
The company bled cash and in the early summer began laying people off in California.
It filed for Chapter 11 bankruptcy protection on Sept. 8. At that time it parted ways with Bill Shaner, the executive it had hired to run the California, Arizona and Nevada operations.
Haggen blamed its debacle on Albertsons, which it is suing for $1 billion for allegedly sabotaging the smaller grocer’s entry into the new markets.
Previously, Albertsons had sued Haggen for not paying for some of the inventory it transfered with the stores.