Oct 30

Randalls continues retreat from competitive grocery market

The Houston grocery chain Randalls will shutter three more local stores by year’s end as the company continues to struggle in the region’s hyper-competitive market.

Randalls, a unit of the national supermarket company Albertsons, said Tuesday it would close its locations in Montrose, The Woodlands and Sugar Land in early December, marking six store closures so far this year. Randalls earlier closed its Garden Oaks, Stafford and Cypress stores, bringing the chain’s local footprint to 23 from 51 locations in 2005.

“Closing an underperforming store is always a tough decision, but sometimes a necessary step to position the company for greater success and growth,” spokeswoman Connie Yates said in an email. “Randalls has proudly served Houston since 1966, and we remain committed to the markets we serve.”

Randalls, once one of the top grocery chains in Houston, has been challenged in recent years by regional and national competitors offering lower prices and wider selections. The company, which operates about 40 stores between Houston and Austin, has less than 4 percent of the local grocery market share while H-E-B, Kroger and Walmart each have about a quarter, according to the Shelby Report, a grocery industry research firm.

“Houston’s grocery market is viciously competitive, and Randalls has been unable to compete,” said Ed Wulfe, chairman and CEO of Houston-based retail real estate firm Wulfe & Co, which manages and leases the Randalls in the Montrose area.

Albertsons, of Boise, Idaho, also said it would shut down four stores in North Texas.

Randalls for decades was a leading upscale supermarket chain in Houston catering to the upper-middle class. In 1991, Randalls had more than $1 billion in revenue, and was one of the fastest-growing companies in the city.

Over time, however, Randalls was eclipsed by competitors such as H-E-B, whose 100,000-square-foot supermarkets dwarfed Randalls’ 50,000-square-foot stores.

At the same time, Randalls’ ownership changed hands from local to national operators. Safeway acquired Randalls from the Onstead family in 1999. Albertsons acquired Safeway and the Randalls brand in 2015. The new owners swapped out high-end products, such as Boar’s Head deli, from Randalls and replaced them with generic products.

“Safeway couldn’t handle Randalls,” Wulfe said. “When they took off their panache, they were not a player anymore.”

Randalls in recent years has tried to lure back customers by remodeling stores and introducing online ordering, curbside pickup and home delivery services.

Randalls informed Wulfe last week that it would close its store on the southeast corner of Westheimer and Shepherd. In the late 1980s, Wulfe and a partner, Friendswood Development of Houston, built Shepherd Square, a 129,000-square-foot shopping center anchored by a 61,000-square-foot Randalls Flagship store. The original 20-year lease was a major coup for the development, one of the first two-level urban shopping centers in Houston.

For some time, the Randalls in Shepherd Square was one of the chain’s top-performing stores in the city. Over the years however, sales fell to a third of what they were as H-E-B, Kroger and Whole Foods drew customers away from Randalls, Wulfe said. The grocer’s lease expires next year, and Wulfe plans to start marketing the property soon.

Wulfe said he isn’t worried about replacing Randalls given its location near two major thoroughfares. Possible replacement tenants include another grocer, a big-box retailer, a fitness center or a furniture store, he said.

“It’s very unusual to have 61,000-square-feet of retail space in the heart of the city,” Wulfe said.

That Randalls is ceding prime real estate inside the 610 Loop surprised Jason Baker, co-founder of Baker Katz, a Houston-based retail real estate firm. Randalls’ retreat from Montrose illustrates just how poorly the grocer has been performing against its competitors, he said.

“I’m not sure if this is them waving a white flag, but they are giving up what is arguably one of the most coveted parts of the city,” Baker said. “Even average concepts perform well in great trade areas. Randalls has become so much less relevant that they couldn’t hang on here.”

Nancy Sarnoff and Craig Hlavaty contributed.

By Paul Takahashi / Houston Chronicle

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