Safeway, Kroger Co. and Supervalu closed dozens more traditional stores than they opened last year, according to documents filed with the Securities and Exchange Commission, continuing a trend that has seen them collectively shed hundreds of locations in recent years.
At the same time, operators at both the high and low end — including Supervalu’s Save-A-Lot discount banner — have continued adding new stores and remain committed to aggressive expansion.
“We believe that there is tremendous room for us to grow in the highly populated areas to the west, and we believe we are in the early innings of that store expansion,” said Lisa Klingler, executive vice president and chief financial officer at Greensboro, N.C.-based The Fresh Market, during a presentation at an investor conference last week. She also cited “ample opportunity” to expand in the Northeast and Midwest and fill-in opportunity to grow in its core Southeastern markets.
The company, which currently operates 116 locations — an increase of 13 net new stores in the past year — sees the potential for more than 500 stores nationwide.
The Fresh Market’s plans, like those of the similarly positioned Whole Foods Market, stand in sharp contrast to the recent store-development activity at the “big three” traditional operators.
Cincinnati-based Kroger Co. ended 2011 with 2,435 supermarkets — a net decrease of 25 units from a year ago, following 41 closures and 16 new openings. (Another 14 stores were closed and relocated.) Total square footage remained flat at 149 million square feet.
Pleasanton, Calif.-based Safeway had a similar schedule of closures. It operated 1,678 stores at the end of 2011, a net decrease of 16 locations following six new-store openings and 22 closures. (It also relocated 19 stores.) Square footage was 79.2 million, the same area that it began the year with.
Supervalu, Minneapolis, shed a net total of 12 traditional supermarkets in its most recent fiscal year, which ended in February, including one new opening and 13 closures. Its Save-A-Lot division, however, added 52 net new limited-assortment stores, including 82 new locations and 30 closures. It ended the year with 2,434 total locations.
Kroger, which invested about $1.9 billion in capital expenditures in 2011, projected to spend at least that much in 2012 — a range of $1.9 billion to $2.2 billion. Safeway and Supervalu, by contrast, projected reduced capital expenditures for the current fiscal year. Safeway said it expected to spend about $900 million, vs. $1.1 billion a year ago, while Supervalu projected cap-ex of $675 million, vs. $700 million in the recently ended fiscal year.
The Fresh Market, which plans 14 to 16 new stores in 2012, plans to spend about $95 million to $105 million on cap-ex in 2012, or about 8% to 9% of sales, compared with the 2% to 3% investment planned by the major traditional supermarket chains.
“We continue to believe there is a significant runway for new store expansion in existing and new markets — resulting in mid-teen unit growth for many years down the road,” said Karen Short, a New York-based analyst at BMO Capital Markets.
Similarly, Whole Foods, with about 300 current locations in the U.S., said it has 63 locations in its development pipeline and sees the potential for 1,000 stores. It added 12 net new stores in fiscal 2011, and invested about $365 million in cap-ex.
Whole Foods expects capital expenditures for fiscal year 2012 to be in the range of approximately $410 million to $460 million, which includes the opening of 24 to 27 new stores.
Among traditional supermarket operators, Lakeland, Fla.-based Publix Super Markets remains among the few committed to significant new-store development. According to its most recent filing with the SEC, in 2012, the company plans to open 30 supermarkets and invest about $730 million in cap-ex. In 2011 the company spent $603 million on cap-ex, adding 12 net new supermarkets and remodeling 126 locations. Net new supermarkets added 600,000 square feet in 2011, an increase of 1.3%.
Of the 17 supermarkets Publix closed in 2011, 11 were replaced and five are scheduled to be replaced on-site.