Grocery store chains such as Safeway Stores Inc., Albertsons Inc.,Winn-Dixie Stores andThe Kroger Co. are facing serious financial issues due to their high cost structure and competitive forces, according to a turnaround firm. Craig Dean, principal and managing director at AEG Partners, predicted these issues will likely lead to industry consolidation, the divestitures of stores in underperforming markets, major restructurings or possibly even bankruptcies. Dean declined comment on whether his firm had contacted these stores in particular, though he said it has had conversations with similar companies.
Consumers are increasingly shopping at more diversified supermarkets such as Wal-Mart Stores, Costco Wholesale and Target Corp. which, unlike the traditional grocers, are non-unionized and have lower distribution costs, said Dean.
"It's not imminent that they (traditional grocers) are going to file for bankruptcy but they do have problems," said Dean. "It's too early to tell right now, but the next 12 to 18 months is a critical time to determine whether they will need to restructure or even go into bankruptcy."
Representatives from the four grocers in question did not return calls seeking comment by press time.