Delhaize Group, the Belgium-based parent of Food Lion chain in the U.S., is the latest grocer to shrink its store count. The latest news on store closings follows on the heels of A&P announcing last week that it plans to close 14 more stores following its emergence from bankruptcy and, more recently, another grocery store chain, Sprouts, said it will close three Austin, TX area stores.
According to analysts, these store closings won't be the last.
"The fact is that further grocery shakeout is inevitable," said Garrick H. Brown, retail research director at Terranomics. "The grocery pie only has so many slices. Mid-size regional chains, particularly those that are unionized, will likely see the greatest challenges ahead. Because of this, expect more mergers and acquisitions in the months ahead."
However, Brown added: "All of these closure announcements fall against the backdrop of a wide variety of new grocery concepts expanding in the marketplace. The good news for landlords is that there are plenty of new concepts looking to expand that could backfill these vacancies. The bad news is that most of the store closures will likely be from the old guard-traditional grocery store users in the 50,000- to 80,000-square-foot range. Most of the chains in growth mode are smaller format concepts."
Delhaize will close 113 underperforming Food Lion stores, most of which are in markets with the lowest store density. It will also close a distribution center and 13 additional Bloom and Bottom Dollar stores.
Also as part of the resizing, the grocer plans to convert 42 Bloom stores back to Food Lion. Seven Bloom stores will be closed and the Bloom brand will be retired. Food Lion divvied up its Food Lion stores in 2004 to differentiate between the higher-end Bloom concept and traditional deep-discount, no frills Food Lion stores.
In the U.S., Food Lion has decided to focus its Bottom Dollar Food brand on markets which provide the greatest opportunity for growth such as Philadelphia, where it has enjoyed considerable success, and in Pittsburgh, where it will open its first stores this quarter.
It will convert or close the Bottom Dollar Food brand stores in North Carolina, Virginia and Maryland. This will result in the conversion of 22 Bottom Dollar Food stores to Food Lion and the closing of six stores in these markets.
The good news is that Delhaize plans to add hundreds of Bottom Dollar Food stores in the next five years. For starters, Delhaize will open 14 Bottom Dollar Food stores in Pittsburgh and Youngstown, OH, by the end of the first quarter, and it expects to open another 10 to 15 stores by year-end in its newer markets.
"While we grew our revenues for the full year, we are disappointed in the fourth quarter revenues in the U.S. and Belgium. Consumers continued to feel pressured in the fourth quarter due to the macro-economic environment and this led to a reduction in spending," said Pierre-Olivier Beckers, president and CEO of Delhaize Group. "We also encountered an increase in competitive activity. We are determined to further improve our price competitiveness in 2012, particularly in the U.S. and Belgium."
"After a thorough review of our store portfolio, we have decided to close or convert a number of stores in the U.S. and in Southeastern Europe during the first quarter of 2012," Beckers said. "This decision is in line with our New Game Plan which is aimed at accelerating profitable growth. For a retailer, it is never an easy decision to close stores as we are fully aware of the impact on our associates, our customers and the communities we serve."
"We are consistently executing our New Game Plan strategy and continue to invest in the many initiatives that are part of it such as the successful brand strategy work at Food Lion, the expansion of Bottom Dollar Food in its newer markets and our growth plans for Southeastern Europe," Beckers added.
Delhaize Group ended 2011 with a sales network of 1.650 supermarkets in the U.S., a net addition of 23 stores over 2010.
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