Two years ago, Albertsons Cos. postponed an initial public offering (IPO) after Walmart dropped a phenomenal profits report in their lap just ahead of the launch. Now the Albertsons brass has reportedly called off another IPO in the wake of Amazon’s acquisition of Whole Foods — but rumors are in the air that the chain is looking at a deal to grab up-and-coming natural foods chain Sprouts.
Albertsons, the nation’s second-largest retailer with some 2,000 stores, was in the hunt for Whole Foods. In the wake of the Amazon deal, Albertsons scuttled its IPO plans, an insider told Bloomberg News.
In 2015 the company had been hoping for valuation of about $12.4 billion. In today’s environment, it’s highly unlikely the chain could raise anywhere near that amount. But Albertsons has regularly updated its quarterly financial reports with the U.S. Securities and Exchange Commission, with the latest filing coming May 11, a sign that an IPO could still be in the offing — or that Albertsons is just keeping its options open.
Bloomberg reported that Albertsons was discussing a merger with Sprouts Farmers Market Inc. as recently as March.
“Definitely there are fewer opportunities for strategic acquisitions that go beyond mere scale (price) advantages,” retail and CPG growth strategist Peter Killian, a principal with Chicago’s The Cambridge Group, told SPW this week. “Few investors are excited about committing the next available dollar towards a generalist grocery proposition.”
Overall same-store sales under the Albertsons umbrella dropped 3.7% in Q4 2016..
Albertsons stock dropped after the Amazon news and the company canceled plans to buy back $500 million of bonds.
All supermarket stocks have taken a beating in the last month.
All of which leads Killian to believe retailers are going to have to change the way they do business to remain competitive.
“Instead of grocery ‘general hospitals’ all competing with one another on price, we may see creative arrangements where specialists — group specialist practices — join forces to create a differentiated and better experience,” Killian said. “Instead of specialists being in many locations that require shoppers to make more trips, they could all be under one roof – a ‘food court’ of grocery shopping.”