Las Vegas Sun

November 14, 2018

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Raley’s converting Albertson’s, looking at further LV growth

Raley's makes its entry into the Las Vegas supermarket battles this week, completing its acquisition of 19 former Albertson's grocery stores. This move will likely be just the first salvo fired by Raley's as it plans even further expansion in the Las Vegas market.

"We're an aggressive company, and we expect to aggressively expand our presence in this market," said company spokeswoman Carolyn White. "We don't intend to just sit on our laurels, but do expect to develop our position in this area."

Beginning this week, local Albertson's shoppers -- and the 1,600 supermarket employees who serve them -- will see the Raley's name at their stores.

On Wednesday, the first of 19 Las Vegas supermarkets currently sporting the Albertson's marquee will change its banner to that of Raley's.

The West Sacramento-based grocery chain plans to honor the contracts of all unionized employees.

The arrangement is an offshoot of Albertson's $13-billion merger with American Stores Co., parent of the Lucky grocery store and Sav-On drug store chains. The combined company, which will retain the Albertson's name, will operate 2,500 stores in 37 states.

Raley's entry into the Las Vegas market evolved from a federal government requirement that Albertson's divest its local holdings before completion of its merger with American Stores. For Albertson's, that translates into a corporate game of give and take: on the one hand Albertson's is gaining 26 local Lucky stores, while at the same time selling 19 existing brand name facilities.

Both Albertson's and Raley's have declined to disclose terms of their deal.

On Wednesday, the Albertson's store at 8140 S. Eastern will close for three days as employees make way for the new owners.

"That will be the first of the stores to change over in Las Vegas," explained Raley's spokeswoman Carolyn White. "We will be staggering the changes over the next several weeks. Each of the stores will close for three days while employees put in the new signs, and take out any of the products that bear the Albertson's name."

Those products, along with a wide assortment of other goods, will then be donated to local food banks. White estimates that more than $2 million in goods will be passed along to charity.

A private, family owned firm, Raley's is a powerful presence in Northern California and currently operates 14 stores in Northern Nevada. Founded in 1935 by Thomas P. Raley of Placerville, Calif., the chain has 17,000 employees working in its 14,500 retail stores.

Upon completion of the acquisition, Raley's will retain about 98 percent of Albertson's employees, White said.

"Only eight store managers, who had considerable seniority with Albertson's, will remain with that company," she said.

For its part, organized labor welcomes Raley's -- ranked the 38th largest supermarket chain in the country -- into the Las Vegas labor market. That stance sharply contrasts with union opposition to the plans of Wal-Mart, the nation's largest retailer, to enter the local grocery wars.

"They (Raley's) bring with them a very good reputation," said Roberta West, president of the United Food and Commercial Workers Union Local 711 in Las Vegas. "They have said they'll honor all existing contracts with Albertson's employees. In addition, they will also honor all seniority, meaning that an Albertson's employee with 20 year's experience will automatically become a 20-year Raley's employee."

Those conditions will apply to all of Albertson's Clark County-based employees, said West.

While Raley's officials welcome the chance to expand the franchise, industry observers also had kind words for the merger deal that made the firm's entry into Las Vegas possible.

"It's a very good deal for Albertson's," said Mike Shea, an analyst with D.A. Davidson & Co. in Portland, Ore. "They've actually sold off more properties than most people expected, but it (the merger) places them well in the industry."

Robert Izmirlian agrees.

"I think it was a fair deal all around," said Izmirlian, an industry analyst with Standard & Poors. "And there appears to be a good deal of room for Albertson's to improve their acquisitions. American Stores' net margin was not the greatest, and Albertson's is a very well-run company. I also like the idea of combining supermarkets with drug store operations. That's a very viable concept."

Izmirlian adds that Clark County's impressive growth rate makes it a desirable new market for grocery chains.

"There's no doubt that they (Raley's) would find themselves naturally attracted to a market that's growing as fast as Las Vegas," he said.

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