Lucky's Market Closing Dozens of Stores: Report

In the aftermath of an abrupt disinvestment by financial backer The Kroger Co., Lucky’s Market is planning to close dozens of stores nationwide, according to reports.

Lucky’s, which grew behind a hip, affordable take on natural foods and the associated “foodie” movement, attracted investment from Kroger in 2016, with the Cincinnati conventional giant bankrolling a rapid expansion, particularly in Florida. Late last year, however, Kroger said it would disinvest, noting the division was not meeting return goals and still required significant investment capital to reach scale.

The withdrawal left Lucky’s with 27 Florida stores and another 14 in the development pipeline there. It operates 39 stores overall. Company officials said in November that they would work with Kroger “to determine best steps for moving forward.”

The Sun Sentinel newspaper said Lucky’s would be closing all but one of its 21 stores in Florida by Feb. 12, along with a distribution center that opened there in 2018. Liquidation sales were to begin this week. Some stores in other markets reportedly were also informed of pending closures this week.

A company spokesperson did not immediately respond to a request for comment.

Founded in Niwot, Colo., in 2003 by the husband and wife team of Bo and Trish Sharon, Lucky’s approach to food retail reflected the founder’s culinary roots with scratch-prepared meals, an assortment that combines conventional and natural products, value pricing on fresh food, and a millennial-friendly take on the foodie culture with in-store beer and juice bars and house-smoked bacon. Workers wore mechanic-style coveralls, and most stores used garage door-style entrances allowing for outdoor merchandising.

It’s initial growth—mainly through college cities along the routes of its suppliers—was funded primarily through the federal EB-5 program, which provides visas for certain foreign investors. That got Lucky’s to 17 U.S. sites before Kroger directed investment almost entirely in Florida—a state where the chain had no conventional store presence.

Jay Jacobowitz, founder and president of Brattleboro, Vt.-based natural food consultant Retail Insights, told WGB he felt the rapid expansion put strain on the prepared foods emphasis that marked Lucky’s early stores.

“Essentially, Lucky’s strategy was subsumed by Kroger’s strategy,” Jacobowitz said. “It’s very difficult to replicate gourmet prepared foods at scale.”

Kroger made an undisclosed investment in Lucky’s in April 2016. At the time, the company said the partnership was designed to further enhance the products, practices and techniques at Lucky’s. “These strengths, combined with Kroger's scale and experience, will in turn create benefits for customers and help Lucky’s Market grow over time,” it said.

Kroger said its disinvestment supported a rigorous new standard for return on capital enacted as it steers toward its own transformation and pumps investment into digital capabilities. 

Kroger Chief Financial Officer Gary Millerchip said, “I think it’s still probably to be proven in the industry about what is the right model for a smaller format store and how do you make that economic model work.”