Haggen’s huge expansion earlier this year may have been too much. The Bellingham-based grocer announced Friday that it will close or sell 27 stores in California, Arizona, Nevada, Oregon and Washington in the next 60 days.
The closures are the first round of a “right-sizing” process that will include additional closures and sales, said Haggen spokesperson Deborah Pleva.
So far, Haggen plans to close 16 stores in California, five in Arizona, five in Oregon, and one Washington state store in Spanaway, south of Tacoma, according to a press release.
“Haggen’s goal going forward is to ensure a stable, healthy company that will benefit our customers, associates, vendors, creditors, stakeholders as well as the communities we serve,” said Haggen Southwest CEO Bill Shaner, in the press release. “By making the tough choice to close and sell some stores, we will be able to invest in stores that have the potential to thrive under the Haggen banner.”
Haggen acquired most of the closing stores earlier this year in a deal with Albertsons. After reviewing Albertsons’ merger with Safeway, the Federal Trade Commission ordered Albertsons to sell 168 stores to avoid a monopoly. Haggen bought 146 of the former Albertsons and Safeway locations.
Haggen is closing one store in Tualatin, Oregon, that it owned before the Albertsons deal.
Haggen began converting the former Safeway and Albertsons stores early this year, going from 18 stores in the Northwest with 2,000 employees to 164 stores with more than 10,000 employees in Washington, Oregon, California, Nevada and Arizona. The company doesn’t know yet how many jobs will be affected by the closures, according to a press release.
The company has faced some challenges at its new stores. Newspapers in California and Arizona reported that customers complained about the cost of Haggen compared to other grocery stores. The already competitive grocery industry in California, Arizona and Nevada reacted to Haggen’s entrance by cutting prices, Shaner said in a statement in July.
“The competitive activity launched in response to our entry into the marketplace—while expected—has been unprecedented,” he said.
Haggen is also facing a $36 million lawsuit from Albertsons, which accused the company of not paying for inventory at 32 stores, the Los Angeles Times reported on July 20.
When the FTC decided last year that Albertsons had to divest stores, Albertsons got to pick who to sell the stores to. The FTC evaluated and approved the sales.
“Sure, [Albertsons] got to pick who they were going to compete with but it only goes through if we’re satisfied,” said Dan Ducore assistant director of the FTC’s Bureau of Competition.
In considering the deal, the FTC looked at Haggen’s business plan, financial projections and sources of capital, Ducore said,
New Haggen stores are competing with many Albertsons-owned stores, including stores under the Safeway, Vons, and Pavilions banners. If Haggen sells stores, Albertsons could be allowed to buy them, but the FTC would have to analyze and approve those deals as well, Ducore said.
Divestments can be especially tricky in the supermarket industry, he said.
“This isn’t the first case where someone is going through some adjustments, lets say, after making an acquisition,” Ducore said.
Oliver Lazenby, associate editor of The Bellingham Business Journal, can be reached at 360-647-8805, Ext. 5052, or firstname.lastname@example.org.