Raley's Folds Its Hand in Las Vegas

Just three years after buying 18 supermarkets in the Las Vegas market, Raley's Inc. (West Sacramento, Calif.) has announced it will be selling all of them, to The Kroger Co. (Cincinnati).

The transaction, which is subject to certain customary conditions, is expected to close within 30 days. The majority of the stores, which average 46,000 square feet in size, will be converted to either the Smith's or Food 4 Less banner. Smith's currently operates 19 stores in Las Vegas, while Food 4 Less has five existing stores in the area and two additional stores under construction.

Despite high optimism at the time it entered the market, Raley's found itself stuck in the No. 4 position in the Las Vegas market, unable to battle intense competition from entrenched rivals such as Albertsons, Smith's and Vons. “Our market share has always been the same there, hasn't really grown from around 9.4 percent, 9.8 percent,” explained Raley's president William Coyne. “We are not as well-known as we need to be in order to be as successful as we wanted to be in Las Vegas.”

Raley's poor market share in Las Vegas evidently wasn't the only factor behind the decision to sell the stores it acquired in 1999 when Albertsons and American Stores merged. Officials said shifts in American demographics, changing eating habits and encroaching grocery competition from Wal-Mart, Kmart and Target were also factors. “The next five years will bring fundamental changes in our industry,” said Coyne, “and we had to re-evaluate what we're doing.”

Raley's said it plans to funnel proceeds from the sale into building and remodeling its stores throughout Northern California and Reno, Nev., operating under the Nob Hill, Bel Air and Raley's nameplates. The company operates about 150 supermarkets and larger-sized superstores, mostly in Northern California. Readers of Consumer Reports magazine named Raley's the No. One supermarket chain in the U.S. in 2000.