GRAND RAPIDS, Mich. -- Spartan Stores here last week said it was "exploring alternative strategies" related to its 39 Food Town supermarkets in Ohio and Michigan, following reports that the struggling stores might be for sale. Spartan said it retained investment-banking firm The Food Partners, Seattle, Wash., to assist in the review.
"All options under consideration are intended to more rapidly return our overall operations to profitability," said James B. Meyer, chairman, president and chief executive officer, in a prepared statement. Meyer, who last year said he would retire sometime in 2003, could not be reached for further comment.
Spartan also said it would shutter its distribution operations in Ohio during the fourth quarter. The company operates 55 other supermarkets and 21 deep-discount drug stores, in addition to its wholesaling business.
Chuck Cerankosky, analyst, McDonald Investments, Cleveland, cited both A&P, Montvale, N.J., and Kroger Co., Cincinnati, as potential buyers for the Food Town stores, although he said the chain might have to be sold piecemeal. Food Town is No. 2 in the Toledo, Ohio, market, with a 24% share of grocery sales, according to local reports. Kroger is No. 1 with a 32% share.
"I can't imagine the stores being so perfectly dispersed that Kroger wouldn't have an antitrust problem there," he said.
Kroger said it does not comment on rumors and A&P could not be reached for comment. A&P has five Farmer Jack stores in the market, but has been struggling, according to local sources.
Jefferson Stephens, president, United Food and Commercial Workers Local 911, Holland, Ohio, which represents workers at 25 of the Food Town stores, said rumors about the potential sale of Food Town have been circulating for the past six months.
"Just about any grocery company within 500 miles of here has been rumored to be looking at Food Town," he said, adding Safeway, Food Lion, Safeway and Giant Eagle to the list of rumored potential suitors. He said he thought some of the recently remodeled Food Town stores had been performing better.
In addition to a sale to a major national or regional chain, another option, Cerankosky said, would be for Spartan to sell the stores to independent operators and then supply them through its Michigan warehouse. Spartan also could consider converting the Food Town stores to its more successful Pharm deep-discount drug-store format, he speculated.
Stephens of UFCW said the Toledo market has been highly competitive with the recent entry into the market of Giant Eagle, Pittsburgh, and with constant price pressure from Wal-Mart Stores, Bentonville, Ark.
Last year Spartan closed six Food Town stores and brought in new management in an effort to revitalize the chain, which the company acquired in 2000 in a merger that transformed Spartan from a member-owned cooperative into a publicly traded retailer/wholesaler.