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Albertsons, the second-ranked US supermarket chain, said this morning that it has hired an investment banker to explore strategic alternatives that would include its sale to another company.

The company said that it would not discuss the results of the strategic review until its board of directors has approved a deal, according to one published report.

While the Idaho-based chain’s financial results have improved enormously over a year ago – in June, it said that its quarterly profit had tripled versus a year earlier, signaling its ongoing recovery from the Southern California strike/lockout – management has conceded that it has been hurt by increased competition from companies such as Wal-Mart, as well as from venues such as the dollar store industry, as well as from regional chains looking for any edge that will allow them to survive.
KC's View:
We are not surprised by this development.

For one thing, the conventional wisdom among many of the retailers with whom we have spoken in recent months has been that current management at Albertsons is wearing out its welcome – that Larry Johnston’s honeymoon is coming to an end. The sense has been that while Albertsons has not been doing enough to establish itself as a compelling alternative to consumers – which is something that a lot of people seem to think that the former GE executive just doesn’t get.

But there’s another reason this doesn’t surprise us.

While we’ve been on vacation this week, a new Shaw’s store opened in our Connecticut town. (Shaw’s, as you know, is owned by Albertsons.) Now, our town has been waiting for this store for over a year. It used to be a Grand Union, was taken over by Shaw’s, and then was closed for remodeling. Then, they decided to tear the whole building down and rebuild it from scratch, leading many in the community to eagerly await what we assumed would be a showplace supermarket that would compete with an old Stop & Shop, an excellent Palmer’s independent supermarket, and a number of nearby stores including the estimable Stew Leonard’s.

And when it opened, many people viewed the new store with enormous disappointment. Because it was a model of 20th century supermarketing – not a store for the 21st century. There is little in the way of the consumer-driven technological innovations that Johnston has been talking about lately. There wasn’t even self-checkout. (And in some categories, there wasn’t even as strong a selection as there was when it was a Grand Union – and that seems like an awful statement to have to make.)

Now, there may have been plenty of internal rationales for why this store couldn’t be made into anything more. But the customers we spoke to (hardly a scientific sampling, we admit) were profoundly disappointed by what they viewed as the mediocre end to a long period of construction. Shaw’s/Albertsons has lost the opportunity for a “wow!” moment, at least with this store. That’s a shame.

What this may add up to – and we suspect that today’s announcement confirms it – is that Albertsons ultimately may be plagued by a lack of vision. The company knew it had to compete, had to be more efficient. But it may have found it difficult to take that mission statement any further – couldn’t qualify and quantify what it wanted to be in consumers’ eyes, minds and hearts.

Our hope: that Albertsons will come out of this with new, vigorous leadership, as opposed to competent management.