WILLIAMSVILLE, N.Y. — Tops Friendly Markets here is now the “neighborhood grocer” in a lot more neighborhoods.
Following its acquisition of Penn Traffic's 79 stores out of bankruptcy, Tops is preparing to embark on a comprehensive investment program that will seek to reinvigorate the properties and imbue them with the same local appeal that Tops seeks to embody in its own stores, Frank Curci, Tops' chief executive officer, told SN last week.
“This is a combination that's made sense for a long time, and one that has been talked about and even explored,” he said. “But the bankruptcy gave us a chance to get at what we really wanted the most, which is the store assets. There are some very good stores, some very good people, and some very good communities that need to be served better than they have been in the past.”
Curci said Tops, which has been owned by Morgan Stanley Private Equity since 2007, plans to invest “tens of millions” of dollars in improvements in the acquired locations in the first year.
“This was a company that was in bankruptcy, so they have a lot of capital needs,” he said. “But we think that our philosophy of operating neighborhood grocery stores that have the widest variety of products that people want, with a convenient format that people feel comfortable that they can get in and out of pretty quickly — there's a place for that in our market. These stores are very similarly positioned to ours, but they just haven't had the money to pull it off.”
With an average square footage in the mid-30,000 range, the acquired stores are significantly smaller than Tops' 59,000-square-foot average, Curci said. Both use a high-low pricing strategy, and they also have faced similar competition, including Wal-Mart and local powerhouses Wegmans and Price Chopper. Both companies are supplied by C&S Wholesale Grocers, Keene, N.H.
“We like the fact that more business will be coming to our Buffalo [N.Y.] warehouse,” Curci said. “C&S gives us great scale and efficiency, and that will be even greater now with the added volume.”
One of the biggest undertakings of the acquisition will be the IT conversion from Penn Traffic's systems to those of Tops, Curci explained. He said the company has a plan to substantially transition the back-end systems within 30 to 90 days.
The company is also in the process of examining which stores will be closed, although Curci said he anticipates that Tops will operate “a majority” of the acquired locations. Some stores “on the fringes” geographically could be sold or closed, he said. In addition, the Federal Trade Commission is conducting an antitrust review and could mandate that a few stores be sold, he said.
Tops is also evaluating possible banner changes for acquired stores. The 12 Quality Markets in the Buffalo and Erie County region will likely take on the Tops name, Curci said, but the company is assessing the strength of the P&C and BiLo banners in the regions where they operate.
Tops has a 30-day operating agreement with Penn Traffic to continue running the stores. Penn Traffic's headquarters in Syracuse, N.Y., and the workers there were not included in the acquisition, although Curci said he expected Tops will add 50-75 senior operations personnel from Penn Traffic.
