Albertsons said to be in merger talks with Sprouts
Grocer eyes chain in what could be wider consolidation trend
Investors barely reacted Monday to a report that Sprouts Farmers Market could merge with grocery giant Albertsons.
Albertsons, whose brands include Safeway, Vons and Star Market, is in early talks to merge with Sprouts, Bloomberg reported.
If the deal went through, Albertsons would pick up an upstart that’s known for a large selection of organic produce that’s priced below other boutique chains suchas Whole Foods Market. Albertsons could take it private.
Yet investors yawned at the news. Sprouts shared closed down 0.9%, or 20 cents, to $21.82.
Albertsons, with stores in 35 states and Washington, D.C., is backed by Cerberus Capital Management. It had planned an IPO in 2015, then delayed it.
“We don’t comment on rumors or speculation,” Albertsons spokeswoman Chris Wilcox said Monday morning.
Cerberus and Sprouts could not be reached for comment.
Sprouts reported net sales of $986 million, a 6% increase over the same period in 2015, and comparable store sales growth of 0.7%, according to its fourthquarter earnings, released last month.
It operates 250-plus stores in 13 states.
While the talks are early stages, they show how shrinking profits in the supermarket industry could lead to a wave of industry consolidation.
Price deflation is cutting into supermarkets’ margins at exactly the time they face fiercer than ever competition.
Discounters, such as Walmart, are gaining ground as are online stores. And organic stores, such as Sprouts, which once reveled in offering niche products, are going up against traditional supermarkets that are expanding their product line-ups to include more natural and organic items.