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Lucky Stores to Become Albertsons

Retailing: Some analysts worry that the change, which culminates an ad campaign, will alienate customers and raise the costs of the companies' merger.

November 03, 1999|MELINDA FULMER | TIMES STAFF WRITER

In this year's $12-billion marriage between supermarket chains Lucky and Albertson's, it's Lucky that won't be keeping its name.

Beginning today, all 480 Lucky stores will be renamed as Albertsons, making the Boise, Idaho-based chain the largest in California. In Orange County, 46 Lucky stores will get a new name.

In keeping with its long-standing policy, Albertson's also will discontinue Lucky's club card, replacing it, company officials say, with lower everyday prices.

The name change raised concern among some analysts who thought the switch to Albertsons could alienate Lucky's core customers. In many parts of Los Angeles, where Albertson's had opened only a handful of stores, shoppers are unfamiliar with the Albertsons name.

Albertson's stock, which had soared as high as $67.13 last December, hit a 52-week low of $34.75 Tuesday before inching up to $34.88 at market close. Many analysts have downgraded the stock in recent weeks.

Some on Wall Street believe the name change is disruptive and will raise the cost of the merger, therefore delaying the earnings gains expected from the combination, according to supermarket analyst Gary Giblen of Bank of America Securities.

But Giblen said he believes the negative view of Albertson's may be short-sighted. He thinks Lucky's image as a low-price leader has been tarnished in recent years as more discount chains moved into the market, and customers might be receptive to a new player.

The switch has been alluded to for weeks in billboards, radio and television spots asking, "Lucky will you marry me?" The company says that its $50-million media blitz--one of the most expensive ever launched by any supermarket chain to win over customers after a merger--is critical given the chain's aggressive plans for California expansion.

"We want customers to know that this is a blending of the two chains," says Roe Cefalo, president of Albertson's California and Nevada divisions. "It isn't one gobbling another up,"

Cefalo says Albertson's plans to build 20 to 30 stores a year in California, beginning with those already under construction in Irvine, Tustin, Ladera Ranch, Culver City and west Los Angeles.

As part of the consolidation, Albertson's also plans to phase out over the next year one of four distribution centers in Orange County, a Buena Park warehouse that supplied Lucky stores.

Distribution centers will remain open in Brea, Irvine and La Habra. Workers from the Buena Park warehouse will be transferred to the other centers, Albertson's spokesman Michael Read said Tuesday. "There should be little or no job loss," he said.

Albertson's purchased Lucky's parent American Stores Co. earlier this year, creating the nation's second largest chain, behind Kroger, with 2,400 stores in 38 states. At that time, Albertson's had not yet decided to change the nameplate on the stores.

Beginning about two weeks ago, the chain began running radio and television ads heralding the "Wedding of the Century" between Albertson's and Lucky. The company also erected teaser billboards and flew planes over stadiums with Albertson's proposal, spending about one-third of its national advertising budget just in California.

"We've seen how badly other chains have handled their coming together," says Hugh Duncan, chief executive of the Venice-based ad firm Duncan & Associates, which is handling the campaign. "People are very sensitive about this whole merger trend."

Beginning today, all of the stores will be draped with an Albertsons' banner, with permanent signs being erected over the next couple of months. Inside the stores, there will be few changes. Lucky's private label products will eventually be replaced by Albertson's products and its meat case and bakery will be slightly revamped.

The most touchy issue will likely be the discontinuation of Lucky's club cards, which have allowed shoppers special discounts and incentives. Although Albertson's officials claim they will keep Lucky's lower prices on most items, industry observers say customers could be skeptical.

To pacify shoppers, Albertson's will make a charitable donation to the Susan G. Komen Breast Cancer Foundation for each returned card. The chain also has agreed to donate $25 million annually to community charities.

Sav-On drugstores, which were also acquired by Albertson's as part of the American Stores deal, will keep their name.

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