Grocer Haggen to close Tucson, other Southwest stores

Grocery chain Haggen will shutter its remaining store in Tucson and more than 120 others to "realign operations." The company filed for bankruptcy earlier this month, and parted ways with an executive who led the company's dramatic expansion that saw it take on 146 stores, a burst from just 18 locations a year ago.

Under federal law, the company must provide employees at least 60 days' notice of a shutdown.

"During this process, all stores will remain open. Employees will continue to receive their pay and benefits through the normal course of business as previously approved by the court," company representatives said.

The move will require the approval of the bankruptcy court. In filings, the company said it was losing about $400,000 daily keeping the stores open.

In August, Haggen closed two stores on Tucson's East Side that had only been open for a few months. A store on North Silverbell had remained open but is now on the list to be shut down.

The Pacific Northwest grocer bought the stores, including those in Tucson, from Albertsons as that company was required to divest locations in a giant merger with Safeway earlier this year.

Haggen has since closed two of the Tucson locations, among 27 in several states it shuttered last month. The company also filed suit against Albertsons, claiming $1 billion in damages.

It will now close 126 stores in Arizona, California, Oregon, Washington and Nevada, company officials said Thursday. Haggen will keep open "37 core stores and one stand-alone pharmacy in the Pacific Northwest," a news release from the company said. Those include 16 stores the company owned previously.

Earlier this month, the company parted ways with Pacific Southwest regional CEO Bill Shaner, who had overseen the expansion since his hiring last December.

Haggen said it was "actively working to explore market interest" (that's code for "attempting a fire sale") in the stores slated for closure. The struggling company is seeking Chapter 11 bankruptcy protection against creditors, whom are owed some $50 million.

"After careful consideration of all alternatives, the company concluded that a reorganization through the Chapter 11 process is the best way for Haggen to preserve value for all stakeholders," CEO John Clougher said in a statement earlier this month. "The action we are taking today will allow us to continue to serve our customers and communities while providing Haggen with a process to realign our operations to be positioned for the future."

Clougher, who had split executive duties with Shaner, is now the company's sole CEO, Haggen said.

The union for grocery workers cautioned the company against cutting workers or pay.

"Our union family will do everything in our power to protect the livelihoods of every member," said a statement from the United Food and Commercial Workers released after the bankruptcy filing two weeks ago.

"We expect Haggen to do what is right by their hard-working employees and their families," the union said.

Haggen owes $50 million-$100 million to as many as 5,000 creditors, a figure equal to its assets, according the the bankruptcy filing.

Haggen has sued Albertsons for $1 billion, alleging anti-competitive practices and fraud in the wake of a deal that saw the chain take over 146 Albertsons and Safeway stores as those companies merged.

Haggen, owned by private equity firm Comvest Partners, paid about $300 million for the stores throughout the West earlier this year.

Albertsons was forced to divest 168 stores in all due to regulatory concerns about monopoly positions in certain markets as that company took over Safeway earlier this year in a $9.4 billion deal

According to Haggen's court filings, Albertsons engaged in “coordinated and systematic efforts to eliminate competition and Haggen as a viable competitor in over 130 local grocery markets in five states,” and “made false representations to both Haggen and the FTC about Albertsons’ commitment to a seamless transformation of the stores into viable competitors under the Haggen banner.”

In July, Albertsons sued Haggen for allegedly failing to pay for about $41 million in inventory that was transferred in the store takeovers. The company denied the allegations in Haggen's suit.

In July, Albertsons began making moves to go public, filing paperwork with the Securities and Exchange Commission for a proposed initial public offering that is likely to be worth billions. Some financial analysts have said the company could have a market capitalization of $16 billion.

A former Albertsons rebranded by Haggen has remained open at 1350 N. Silverbell Rd., but the company said in August that "additional stores may be sold or closed in the future."

Earlier this year, the company grew by leaps and bounds, acquiring 146 stores in five states as a result of Albertsons' recent swallowing up of Safeway. Twenty-seven stores were on the list of those to be closed by the company.

The Tucson stores were rebranded in May.

Haggen, an upscale grocery often compared to Whole Foods (if slightly less costly), also took over Arizona stores in Scottsdale, Anthem, Prescott, Prescott Valley, Lake Havasu City, and Flagstaff. Stores in Anthem, Flagstaff and Prescott Valley were also on the list of those to be closed.

Prior the the purchase, the chain had only 18 stores in Oregon and Washington. The deal, prompted by regulatory concerns in Albertsons $9.2 billion merger with Safeway, had Haggen buy 146 of the 168 stores divested by the grocery giants. The expansion meant Haggen's workforce grew from 2,000 to about 10,000, with 164 stores throughout the West.

Haggen was family-owned from its 1933 founding until 2011, when a majority interest was handed over to private investment firm Comvest Partners. Albertsons, now the second-largest grocery chain in the nation following its takeover of Safeway, is owned by Cerberus Capital Management.