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Delhaize Group will sell Bottom Dollar Food's 66 store locations and associated lease liabilities to Aldi Inc., thereby exiting the U.S. food retail discount segment. Delhaize attributed the move to the company's strategy, unveiled in March, of focusing on its core operations in the traditional supermarket sector. The deal is expected to close in the first quarter of 2015 subject to customary closing conditions.
"The divestiture of Bottom Dollar Food further simplifies our business, increases debt capacity and creates shareholder value," affirmed Frans Muller, president and CEO of Brussels-based Delhaize Group.
Aldi's 'Accelerated Strategic Growth Plan'
According to both companies, the transaction price was about $15 million. Batavia, Ill.-based Aldi said that it was acquiring from Delhaize select fixed assets, including the land, buildings and leasehold improvements associated with the Bottom Dollar banner. Delhaize noted that the deal was expected to result in an asset impairment and other charges for Delhaize of about $180 million.
Aldi, which has operated extreme-discount stores in Bottom Dollar's market area of Pennsylvania and southeast New Jersey for more than 20 years, said the acquisition represented an early phase of its "accelerated strategic growth plan." The retailer plans to open 650 new stores across the United States, including expanding to Southern California, bringing its total number of U.S. stores to almost 2,000 by the end of 2018 and creating an estimated 10,000-plus positions at Aldi stores, warehouses and division offices nationwide.
Bottom Dollar currently anticipates that all stores will remain open until the end of the year, at which time the banner's operations will cease. When the stores close, associates will be offered severance, and eligible employees will be able to receive career transition services.
"This decision was difficult, given the impact on our associates, customers and communities in which we operate," admitted Gene Faller, VP of retail operations for Bottom Dollar, which opened its inaugural store in King of Prussia, Pa., in October 2010, and currently operates 46 stores in greater Philadelphia and 20 stores in greater Pittsburgh, Pa. The banner employs around 2,200 associates.
Q3 U.S. Revenues, Comps Up
In other Delhaize news, the retail conglomerate released its third-quarter financial results including 3.3 percent revenue growth, a 5.9 percent increase in U.S. revenues to $4.7 billion, and U.S. comparable-store sales growth of 5.3 percent.
Also during the quarter, 31 Food Lion stores relaunched under the Easy, Fresh & Affordable strategy this past August; another 45 are scheduled to roll out next week.
"While our overall performance in the third quarter met our expectations, results were decidedly mixed among our key regions," observed Muller. "In the U.S., comparable-store sales growth was very strong … resulting from both continued good momentum at Food Lion and favorable, albeit temporary, competitive dynamics at Hannaford. These positive volume trends resulted in a 10 percent increase in our U.S. underlying operating profit."
Of the store refreshes, he said, "Although it is too early to draw conclusions, they are experiencing good initial customer response."