business news in context, analysis with attitude

A website called Coupons in the News is reporting this morning that bankrupt Haggen, even as it looks to begin auctioning off the stores that it acquired from Albertsons earlier this year, is laying the groundwork to sell off all of its stores and go out of business.

According to the story, "Haggen has requested a hearing to seek 'approval of the proposed sale of the Debtors’ Core Stores.' Those would be the 32 locations it had previously said were not for sale ... Half of them are original Haggen locations, dating back to before the chain’s ill-fated expansion plan, while the remaining half are Albertsons and Safeway stores that the chain purchased earlier this year, and had hoped to hold onto."

“As part of the Debtors’ overall sale strategy,” Haggen’s motion reads, “the Debtors have decided, in their business judgment, to sell all or substantially all of the Assets — which collectively represent the Debtors’ most valuable store locations — in order to further maximize recoveries to the Debtors’ estates, their creditors, and all parties in interest.”

Haggen could not be reached for comment on the report.

To recap the events that brought Haggen to this low point in a history that dates back to 1933 ... the current problems began when Haggen - apparently prompted by Comvest, the private equity group that owns it - decided to grow from an 18 store-chain in the Pacific Northwest to a 164-store chain extending to California, Arizona and Nevada by buying units that the Federal Trade Commission (FTC) said had to be divested when Albertsons acquired Safeway. Almost from the beginning, when the transitions seemed to consist of new signs on the buildings and extremely minor changes inside the stores, Haggen ran into trouble because of prices that were too-high, out-of-stocks that were too numerous, and dwindling customer traffic because of an offering that seemed highly undifferentiated in highly competitive markets.

Haggen had declared bankruptcy and decided to sell all but 32 stores (in a story below, Albertsons wants 36 of them back), but now appears to be ready to pack it in for good.
KC's View:
While Haggen is not yet commenting on this story - either to me or to the source of the story - one has to admit that it seems entirely within the realm of probability. At this point, it would seem that the debts are too deep and the brand equity too eroded for the company to have any sort of sustainable path going forward.

This is a shame in so many ways, and it speaks to so many breakdowns in the system. There are the financial guys who saw numbers but seemed to have no sense of the realities of the marketplace or the capabilities of the company. (They get the Gordon Gekko award ... and they'll probably do just fine when all this is done ... this always smelled more like a real estate play, anyway.) There are the government regulators, who almost certainly need to overhaul what their definition of "competition" means in a world where online shopping has changed the paradigm; they also need to have a better understanding of how companies operate and that, especially in retailing, building a brand is far more difficult than just changing ownership.

But, hey, we can't let the guys running Haggen off the hook ... because they seemed to buy into this whole mishegoss plan without any sense of what they could do and couldn't do. And you can probably argue that Haggen's problems date back pretty far, when it used to spend money on things like private planes and club memberships for senior execs, creating a business model that could not be supported by the stores. People in the know tell me that except for the years that Jim Donald was in charge - getting the stores in shape, the balance sheet in line, and understanding that the company's brand equity was inextricably tied to the quality of its people and the value proposition in the stores - Haggen has been on a losing trajectory for a long time.

I wish I could say that the problems seem obvious only in retrospect. But I don't think that's true. I just think that the people running and funding things not only didn't know what they were doing, but they mismanaged the company to the point where it was FUBAR.

And by the way ... Haggen may say - when it finally comments - that it is only laying the legal groundwork for a possible sale in the hope that it won't actually have to pull the trigger. But my guess is that this trigger is going to get pulled, and that it is going to happen sooner rather than later.

The problem is that a lot of good people with years, even decades invested in this company, stand to lose their jobs or, at least, much of the personal equity that they've built up.

It is such a shame.