Farmer Jack parent offers stores for sale

The store in Perrysburg is one of three on sites of former Churchill's Super Markets.

In a move to cut costs and try to bolster the company stock price, the parent firm of metro Toledo's Farmer Jack and Food Basics stores told managers yesterday it plans to sell the six local stores.

If that happens, the groceries either could be closed or converted to another use, possibly even another supermarket. If no buyer is found, the groceries would continue to operate.

That's what Jeff Stephens, president of the union representing the local store employees, said he was told by an executive of the Great Atlantic & Pacific Tea Co., which owns Farmer Jack and discount Food Basics stores in Michigan and Ohio.

"It appears they've already made the decision to sell," said the head of Local 911, United Food and Commercial Workers.

A spokesman for Montvale, N.J.-based A&P said the company will not comment about the situation.

Farmer Jack moved into the local market in 2001 when it bought three Churchill's Super Markets and later built three other stores. It has Farmer Jacks in Holland, Sylvania, and Perrysburg, and three no-frills Food Basics discount stores Food Basics in Toledo. Combined, they employ about 550.

Mr. Stephens said he was notified by A&P on Friday and Monday that a company executive would be in Toledo yesterday "to discuss the possibility of trying to sell the leases on the stores in Toledo and 26 stores in Michigan."

No timetable was given, he explained, but A&P indicated that if a buyer can be found to take over the store leases, the stores will be sold.

"If they couldn't sell the leases, they were going to continue to operate because it would be too expensive to close the stores," Mr. Stephens said. The costs to break the leases, he added, apparently would be higher than to continue operating the stores.

He said late yesterday he had not been briefed by a representative he sent to the meeting to know what else may have been said.

Managers of several of the local stores declined to comment to The Blade yesterday.

Wall Street investment firm Lehman Brothers two weeks ago raised its rating of shares of A&P and issued a brokerage report suggesting that the grocery chain over the next 1 1/2 years is ready to take "important steps" to boost its stock price. The stock closed at $16.22 a share yesterday, at its 52-week high but well below the nearly $30 a share it traded for about three years ago.

The analyst firm said those steps could include the sale of A&P's 102 stores in the Midwest and its Canadian business, the sale of its 41 stores in the Baltimore area, and the purchase of up to 39 stores from rival Pathmark Stores Inc. in the Philadelphia area, New Jersey, or Long Island, N.Y.

The chain could save up to $30 million with a combination of some or all of the moves, the report suggested. Intense competition and falling revenues are cited as reasons the stores are targeted, experts said.

David Livingston, a grocery chain consultant in Pewaukee, Wis., said his industry contacts indicated the planned sale of Farmer Jack and Food Basics stores has been under way for weeks.

"It's more than speculation," he said. "[A&P] has already been talking to some retailers. The people I've talked to say they've already gotten information that Farmer Jack will be looking to sell and these [competitors] are doing store evaluations."

Published reports this week in Detroit said store managers there have been told that at least some of the chain's stores in the Detroit area would be up for sale.

Mr. Livingston, the consultant, said Farmer Jack's entering the Toledo market seemed to be a mistake from the start.

"They had good stores in Churchill's, but they turned them into Farmer Jacks and that's going backwards," he said. "Then, they turn the Farmer Jacks into Food Basics, and that's going backwards even more."

He said his industry sources have told him that William J. Blair, an investment firm in Chicago, is to handle the sale of up to 70 Farmer Jack stores in the Detroit area, and New York-based New Plan Excel Realty Trust likely will handle the sale of 32 Farmer Jack and Food Basics stores, including the six in Toledo.

Most likely some, but not all, of the Farmer Jack and Food Basics stores will find new owners, he said. "What they're probably trying to do is unload the 70 stores in Detroit to one chain - a Giant Eagle, a Roundy's, a Kroger, or someone like that," he said.

"With those other 32 stores, they're probably going to start piece-mealing those off. Giant Eagle might take some, Kroger might take some. Obviously, not all 32 will be supermarkets when this is over. Some will go dark or become the next Big Lots or an Office Depot."

Said Mr. Stephens, the union official: "The thing is, a couple of those stores are really nice stores. I'm sure someone is going to be interested them. I think it either might be Giant Eagle or Wal-Mart with their small store setup."

Contact Jon Chavez at:

jchavez@theblade.com

or 419-724-6128.