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Haggen to shrink to 37 stores, leave Southwest markets

Customers leave the Haggen grocery store on Meridian Street Thursday, Sept. 24, 2015, in Bellingham.
Customers leave the Haggen grocery store on Meridian Street Thursday, Sept. 24, 2015, in Bellingham. The Bellingham Herald

Haggen plans to consolidate its number of stores to 37 and will exit the Southwest markets it entered nine months ago.

The company said Thursday, Sept. 24 it is asking the U.S. Bankruptcy Court for approval to conduct a second phase of store closing sales. All the stores slated for closure will receive 60-day notice of the pending store closures. During the process, all stores will remain open.

According to court documents, 100 stores are on the closure list, including 14 from Washington state. The 14 Washington stores are in Aberdeen, Liberty Lake, Gig Harbor, Port Orchard, Tacoma, Monroe, Silverdale, Burien, Bremerton, Milton, two in Renton, Everett and Shoreline.

No Whatcom County stores are on the list.

The 37 remaining stores include 16 Haggen stores in place before the acquisition of Albertsons/Safeway stores in December 2014, one stand-alone pharmacy and 21 stores acquired in the transaction.

“The 21 newly-acquired stores have proven successful under the Haggen banner and the company anticipates they will continue to see increased customer counts and sales growth as Haggen continues its original mission of adding more fresh, local and exclusive items to these new stores,” the company said in the news release.

Haggen CEO John Clougher was unavailable for comment Thursday afternoon, focusing on communicating with Haggen employees about the changes taking place in the company, Haggen spokeswoman Deborah Pleva said.

The pending closures are the next step in what has been a tumultuous year for the Bellingham-based grocer.

After spending more than $300 million to acquire 146 stores from Albertsons and Safeway in December, the company struggled to convert many of those stores to the Haggen brand. The company also was hit with a $41.1 million lawsuit by Albertsons for failing to pay for some inventory. Last month, Haggen company announced it would close 27 stores, followed by its own lawsuit against Albertsons for up to $1 billion in damages, alleging Albertsons sabotaged the deal.

Earlier this month, Haggen filed for Chapter 11 bankruptcy protection with the goal of reorganizing the company around its original core stores.

Court documents detail why Haggen wants to close these 100 stores as soon as possible. The stores on the closure list are costing the company $400,000 a day in negative cash flow. The documents indicate that closing the stores would mean a savings of $57.4 million for the remainder of the year. Closing the stores also would mean about $125.6 million in gross proceeds, which would provide Haggen “with a necessary and significant cash infusion,” according to the court documents.

Haggen also noted in its request that the 100 stores slated for closure were locations that another company would not likely make a firm offer to buy.

Hilco has been hired to handle the liquidation sale of the 100 stores, which is expected to conclude in mid-November.

Haggen said that it is continuing to work with Albertsons in its request to the Federal Trade Commission to waive the portion of an order that restricts Albertsons from hiring Haggen employees.

“This has been a priority for Haggen management to ensure its employees can take advantage of every opportunity available to them,” according to the news release.

HAGGEN HISTORY

Here’s a list of recent events for the Bellingham-based grocer:

August 2014: The company hires John Clougher as its CEO.

December 2014: Haggen acquires 146 stores as a part of the divestment process brought about by the Federal Trade Commission’s review of the Albertsons-Safeway merger. With the acquisition, Haggen expands from 18 stores and 16 pharmacies to 164 stores and 106 pharmacies across Washington, Oregon, California, Nevada and Arizona.

Early 2015: Haggen sets an ambitious goal of converting stores under its banner within a 15-week period.

July 2015: The company acknowledges layoffs and the reduction of hours for an undisclosed number of employees, mostly in the south region.

July 2015: Albertsons files a $41.1 million lawsuit accusing Haggen of fraud.

August 2015: Haggen announces the closure or sale of 27 stores, 26 of which were from the Albertsons-Safeway acquisition.

Sept. 1, 2015: Haggen sues Albertsons for more than $1 billion in damages.

Sept. 9, 2015: Haggen files for Chapter 11 bankruptcy protection.

Sept. 24, 2015: Haggen announces it is shrinking to 37 stores and leaving the Pacific Southwest market.

Reach Dave Gallagher at 360-715-2269 or dave.gallagher@bellinghamherald.com. Follow him on Twitter at @BhamHeraldBiz and on Facebook at BellinghamHeraldBusiness.

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