THIBODAUX, La. — Rouses Markets here has agreed to buy 19 Sav-A-Center and A&P stores from A&P in a deal both buyer and seller said would benefit their respective local markets.
The purchase doubles the size of the Rouses chain and will help the Louisiana-based company obtained prized locations in the state's most populous market. For A&P, which sold another two Sav-A-Center stores separately, the deals represent a clean break from its last outlying market, allowing the Montvale, N.J.-based retailer to concentrate on its pending merger with Pathmark Stores in its Northeast home base.
The companies did not disclose a purchase price. A&P had said previously that it expected proceeds of around $160 million from the sale of properties in New Orleans and in Michigan, where it shut down and sold the Farmer Jack chain piecemeal earlier this year. An analyst told SN last week that it was unlikely A&P got any more than $100 million for Sav-A-Center, which generates an estimated $400 million in annual sales.
Donald Rouse, the president and co-owner of the 16-store Rouses chain, told SN last week that Rouses would close three stores that neighbor existing locations and has agreed to sell two: one to the independent Breaux Mart and another to a developer. The 14 remaining stores will be converted to the Rouses name and its format, beginning with a location in Metairie, La., next month.
That means the stores are to be positioned slightly more upscale, and will place a greater emphasis on local products and Louisiana flavor, Rouse said.
“We want to be known as the Louisiana company, and that's what we're moving toward,” Rouse said. “If anybody can do it, it's us. We understand it, we know it. We live it.”
Rouse said some of the Sav-A-Center stores that have been converted by A&P to its fresh format resemble its own stores — 62,000-square-foot units known for their displays of fresh and prepared foods in local Cajun and creole styles.
“The newer stores that Sav-A-Center have are similar in layout to ours, with fresh products and big varieties of wine,” Rouse said. “But they're still lacking some departments that we have. That's the flavor we're going to bring in: The Cajun meats, the bold seafood and more of the prepared foods we do — the gumbos and stews and salads and things that are popular here.”
David Livingston, a Pewaukee, Wis.-based consultant, predicted the acquisition would be a success for Rouses as New Orleans continues to recover population following the devastation of Hurricane Katrina. As one of the first chain businesses to reopen following that event, Sav-A-Center has seen improved sales at many locations.
“These stores are doing tremendous volume,” Rouse said. “There are fewer stores than there were pre-Hurricane Katrina, so the stores that are there are doing very strong numbers. We continue to see New Orleans coming back. We want to be in position to take advantage of the regrowth of New Orleans.”
Rouses is based in Thibodaux, about 60 miles north of New Orleans. It operated only four stores in the New Orleans metro area prior to the acquisition.
“The locations Sav-A-Center has are very desirable, and some just can't be duplicated: They're in areas where you just can't build stores,” Rouse said. “So I like the locations, and I like the volume they do. Some of the stores have been remodeled since the hurricane, and others are stores doing a good business and just need to be updated.”
Rouse said the newly acquired locations will continue to buy goods from C&S Wholesale Grocers for the near term. Rouses' existing stores have a supply agreement with Associated Grocers of Baton Rouge. He said the combined company intends to move to one wholesaler eventually.
“With this amount of stores, the [tight] labor situation in New Orleans, and the holidays coming upon us, we plan on continuing the arrangement with C&S in order to avoid the changeover of private labels and the tearing up of the shelves right at the holiday time,” Rouse said. “Eventually we will choose whichever wholesaler is the best for us.”
A&P will exit New Orleans with little left behind — a trick it failed to pull off in some other markets, like Michigan and Wisconsin — and with nearly all its employees in the market moving to jobs with new owners. Eric Claus, chief executive officer of A&P, in a statement said the deal marked a critical step in A&P's transformation to a business focused solely on the Northeast, where its acquisition of Pathmark is awaiting federal antitrust approval and could close within months.
“This marks a critical step in A&P's transformation, enabling us to focus all resources on our core operations in the Northeast,” Claus said. “We're especially delighted with the sale of the majority of our local stores to Rouses in light of our desire to sell the business largely intact for the benefit of our outstanding store and office associates.”
Transfer of ownership of the stores is expected to be completed over a six-week period. Rouses has rights to use the Sav-A-Center name on the locations for up to one year following the transfer but Rouse said he hoped to have transformations completed before then.
Included in the stores sold to Rouses is an A&P location on Royal Street in New Orleans' French Quarter, said to be the oldest A&P store still in operation.