HOUSTON -- Albertson's will build an undetermined number of stores on the Houston periphery in 1994 and then formally enter this market in 1995, according to industry observers.
Although officials of the Boise, Idaho-based chain declined comment, observers told SN Albertson's has been acquiring sites in south Texas -- in the areas of Laredo and the Rio Grande Valley -- as a preliminary step to moving closer to the Houston marketplace.
An Albertson's entry into Houston would add a new factor to a competitive market already in flux over the sell-off of the AppleTree Markets units and a pull-back by Food Lion, observers said.
Albertson's south Texas stores reportedly would be supplied from the chain's Fort Worth distribution center.
Albertson's already operates in Austin, about 400 miles west of here, and it has isolated stores 50 miles to the north in Conroe, Texas, and 30 miles to the south in Lake Jackson, Texas.
Gary Giblen, a securities analyst at PaineWebber, New York, said by moving in from the
periphery Albertson's will have a better opportunity to establish an identity in Houston.
"The chain doesn't have a pre-established identity in Houston, so it wouldn't have made much sense for it to buy a group of existing stores and put the Albertson's name on them," he said.
According to another observer, "Albertson's has already told the investment community it would go into Houston when it's ready, and it now says it's ready. The company thinks Houston is an attractive market, and it already has several spots picked out."
Jonathan Ziegler, a securities analyst with Salomon Bros., New York, said he believes Houston is a logical extension for Albertson's. "With a store base in Austin," he said, "Houston and eventually Galveston are natural extensions. And with Food Lion pulling back in Houston, there's some share for an everyday-low-price operator to take.
"In addition, with Randall's leveraged from its acquisition of Cullum Cos. and Fiesta, Kroger and H-E-B Pantry Foods fighting it out there, Albertson's may feel there's room for one more operator." Pantry Foods is a conventional store format of H-E-B Grocery Co., San Antonio.
Before AppleTree Markets here sold off its stores to a variety of buyers late last year, Randall's controlled a 20% market share, compared with Kroger's 18%, Fiesta's 10%, Pantry Foods' 7% and AppleTree's 6%.
Observers see pluses and minuses for Albertson's to enter this market.
"On the one hand, you could say this is not a good time to enter because the Houston market is already overstored," one area retailer told SN. "But on the other hand, it may be a good time because several of the major players are relatively distracted, with Kroger digesting 11 former AppleTree stores, Randall's digesting 15 former AppleTree units, including 12 in Austin, and H-E-B Pantry Foods expanding rapidly and digesting a new distribution center."
According to Giblen, Food Lion's decision to reduce the number of its Houston locations makes Albertson's move into this marketplace less risky.
Food Lion, as reported earlier, has decided to close 88 unprofitable stores, including 36 in Texas. Six of the Texas stores scheduled to close are in the Houston market, according to observers.
"H-E-B Pantry Foods has put low-price pressure on the market," Giblen said. "But the reduced role of Food Lion means other operators may be able to be less aggressive than they would have been if Food Lion had made a major effort there."
Until the arrival of Pantry Foods, Houston was below average in terms of competitiveness, he said. "And now it's an average competitive market, but not a hotbed of competition. Real-estate is available there, so there's plenty of space to build stores," Giblen said.
The Houston periphery stores Albertson's will develop are likely to be the 40,000- to 45,000-square-foot, combination-store prototype the chain has developed for the smaller communities in which it operates, observers said.
