LOS ANGELES -- Unified Western Grocers here said last week it will exit its 12-store retail business as part of a quasi-reorganization that will give the member-owned cooperative greater financial flexibility.
Unified operates five retail stores and owns seven others that were closed during 2002, including three that closed Dec. 23. Ten stores are in Northern California and two are in Oregon, ranging in size from 20,000 to 50,000 square feet and accounting for sales of approximately $140 million.
Al Plamann, president and chief executive officer, said divesting the stores will increase the company's financial flexibility to invest in its wholesale distribution business and reduce debt.
"Although our retail operations experienced an improvement in 2002 over the previous year, the board and management agreed that exiting our retail business was in the best interests of our membership and the company," Plamann said.
The decision to exit and divest retail operations was the result of a strategic review of Unified's overall business and was based on several factors, Plamann said, including a desire to focus more resources and investments in the company's profitable wholesale distribution business.
The company said it will become more aggressive in seeking buyers for all 12 retail stores.
Unified delayed filing its financial results for the fiscal year ended Sept. 28 from late last month; it said it plans to file the results next Monday.
According to the company, the delay will enable it to account for the retail stores as discontinued operations in the current and prior year's activities.
Sales for fiscal 2001 are expected to fall 3.5% to $2.8 billion, industry sources told SN. The company said wholesale distribution accounted for 95% of the total, and corporate retail accounted for the other 5%.
Unified also said it will adjust its balance sheet and utilize an accounting procedure called a quasi-reorganization -- an accounting procedure that enables a company to eliminate an accumulated deficit in retained earnings while permitting it to utilize "fresh start" accounting, "which is beneficial to the company's shareholders and establishes a solid foundation for the future," Plamann said.
One of the key components to qualify for a quasi-reorganization is that the company must have achieved a turnaround in profitability, Unified explained. Unified reported a loss of $13.1 million in 2001, which a company spokesman said was due to losses from the retail operation and two of Unified's wholly owned subsidiaries -- Grocers Specialty Co. and Grocers & Merchants Insurance Service.
All three segments showed improvements in fiscal 2002, the spokesman said, with the two subsidiaries reporting profitable results.
Unified said it will restate its assets and liabilities to their fair values, with the net adjustment added or deducted from the retained earnings deficit; the residual balance in the retained earnings account would then be eliminated by a transfer from paid-in capital, the company explained.
Unified introduced Apple Markets as a corporate banner program in 1996 and moved into corporate retail ownership in 1998 when it acquired a group of stores from a Northern California customer that were converted to the SavMax Foodsbanner; it added corporate stores under the Apple banner in mid-2001 when another Northern California member liquidated his assets, and it added two corporate stores in the Pacific Northwest when it merged with Portland, Ore.-based United Grocers in 1999.
Of the five stores still in operation, two in Moraga and Novato, Calif., operate under the Apple Markets banner; two in Ceres and Modesto, Calif., operate under the SavMax banner; and one in West Linn, Ore., operates under the Thriftway banner.
Three of the remaining seven stores -- all SavMax units -- closed on Dec. 23 in Modesto, Sacramento and Vacaville, Calif.; the other four stores encompass a Thriftway in Longview, Wash., that closed in September, plus SavMax locations in Sacramento, Calif. (closed in January), Oroville, Calif. (June) and Vallejo, Calif. (November).
