November 7, 2006
Tops for Sale
Royal Ahold announced yesterday that it intends to sell its Tops Markets business in upstate New York.
Tops, the largest chain in the Buffalo area and number two in Rochester behind Wegmans, has gotten smaller in the past year as the company sold off its Wilson Farms convenience store business as well as its supermarkets in Ohio.
Tops spokesman Denny Hopkins, said, the company is confident that a single buyer will be interested in picking up the business. “We think Tops is a very, very strong brand, and it’s a very attractive prospect for a buyer,” he said.
While Mr. Hopkins said, “it’s business as usual,” Ahold’s decision to seek a buyer for Tops means the company will have to suspend its $60 million store renovation program.
The Tops chain currently operates 72 stores in New York and Pennsylvania.
Discussion Question: What do you see as likely scenarios for Tops now that Ahold has decided to sell the chain?
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A single buyer is always a possibility, but few people have ever sold a profitable enterprise. So, while I’m sure they’d prefer a single buyer, odds are the stores may get parceled out to a variety of kinds of retailers.
Ahold is prudent to shed Tops and its tidy corner of the food world. Tops is not the Google of Groceryland. New management could likely add “something” to Tops operations which would allow Tops to maintain #1 SOM in Buffalo and Western New York. That is, unless or until Wal-Mart should seriously invade the Buffalo area market. Then, even with new management at Tops, whether it be a retail or financial group, that possible entry would likely tip-top Tops.
Tops is no longer the gem that it once was. It has been getting smaller during the past year with the divesting of the convenience stores. It is altogether possible to see the New York stores sold to one group and the balance to another.
Most supermarket chains which are offered for sale should only be purchased at loss leader prices, assuming the leases can be used for something else. Like used cars, there’s usually a reason they’re for sale: they’re more trouble than they’re worth. Any possible new Tops owner would want to know if the stores can be converted into drug stores or other uses. Certainly the drug store business is rapidly expanding, so they’d probably pay the most.
Ahold seems to be shedding non-top performers worldwide; yesterday it also announced that it is pulling out of Poland and elsewhere in Central Europe and wants to focus on markets in which it’s one of the top three (an attribute to GE’s success?). I am wondering what else it will do to become a lean & mean money-making machine. I am also curious about who will buy up the pieces.
Tops was ruined by Royal Ahold. So it is a safe bet that it would be sold off in chunks. C&S could be a main buyer of the bulk of the stores, and then sell-off what A&P and perhaps Weis and Price Chopper may want. It is C&S’s main business to keep its customers, especially A&P, healthy and growing. Their success is C&S’s success.
I was surprised Ahold has waited to unload Tops. Single buyer? Perhaps, but the buyer is going to be closing a lot of stores. Perhaps Hannaford can move into Buffalo and then sublease the others that have been destroyed by Wal-Mart, Wegmans, and the self inflicted damage by Ahold.
If the the slowness of the divestiture of Tops in Ohio is any indication of what will happen in New York, we could see these stores lingering for sale for a long time.
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A single buyer is always a possibility, but few people have ever sold a profitable enterprise. So, while I’m sure they’d prefer a single buyer, odds are the stores may get parceled out to a variety of kinds of retailers.
Ahold is prudent to shed Tops and its tidy corner of the food world. Tops is not the Google of Groceryland. New management could likely add “something” to Tops operations which would allow Tops to maintain #1 SOM in Buffalo and Western New York. That is, unless or until Wal-Mart should seriously invade the Buffalo area market. Then, even with new management at Tops, whether it be a retail or financial group, that possible entry would likely tip-top Tops.
Tops is no longer the gem that it once was. It has been getting smaller during the past year with the divesting of the convenience stores. It is altogether possible to see the New York stores sold to one group and the balance to another.
Most supermarket chains which are offered for sale should only be purchased at loss leader prices, assuming the leases can be used for something else. Like used cars, there’s usually a reason they’re for sale: they’re more trouble than they’re worth. Any possible new Tops owner would want to know if the stores can be converted into drug stores or other uses. Certainly the drug store business is rapidly expanding, so they’d probably pay the most.
Ahold seems to be shedding non-top performers worldwide; yesterday it also announced that it is pulling out of Poland and elsewhere in Central Europe and wants to focus on markets in which it’s one of the top three (an attribute to GE’s success?). I am wondering what else it will do to become a lean & mean money-making machine. I am also curious about who will buy up the pieces.
Tops was ruined by Royal Ahold. So it is a safe bet that it would be sold off in chunks. C&S could be a main buyer of the bulk of the stores, and then sell-off what A&P and perhaps Weis and Price Chopper may want. It is C&S’s main business to keep its customers, especially A&P, healthy and growing. Their success is C&S’s success.
I was surprised Ahold has waited to unload Tops. Single buyer? Perhaps, but the buyer is going to be closing a lot of stores. Perhaps Hannaford can move into Buffalo and then sublease the others that have been destroyed by Wal-Mart, Wegmans, and the self inflicted damage by Ahold.
If the the slowness of the divestiture of Tops in Ohio is any indication of what will happen in New York, we could see these stores lingering for sale for a long time.