NIWOT — Lucky’s Market, the Boulder-born and Niwort-headquartered natural-grocery chain that filed for Chapter 11 bankruptcy protection Monday, is exploring the sale of the seven stores nationwide that it said will remain open.
Last week, Lucky’s acknowledged the imminent closure of at least 32 of the company’s 39 locations. Lucky’s has also shelved plans to open 14 new stores in Florida in 2020.
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In a slew of bankruptcy cases filed Monday in U.S. Bankruptcy Court in Delaware, Lucky’s said it has signed an agreement to sell six Florida store locations to German grocer Aldi. The company also announced plans to sell five other locations to Publix Super Markets Inc.
In court filings, Lucky’s refers to six specific locations as “sold stores.” Those sold stores are in Gainesville, Neptune Beach, Naples, Clermont, Orlando and Ormond Beach, Florida. Publix is under contract to buy out Lucky’s leases in Clermont, Naples, Neptune Beach, Orlando and Ormond Beach. Aldi’s has not specified which stores it intends to buy.
Lucky’s officials say the firm plans to keep seven stores open. Among those seven, which court documents refer to as “operating stores,” are north Boulder and Fort Collins.
However, court documents indicate that Lucky’s intends to sell off those operating stores.
Lucky’s is “finalizing the terms of a sale of the operating stores, which will be subject to a bidding procedures motion and approval by the court as well,” according to a bankruptcy filing document. It is unclear whether the potential buyer of those operating stores is Aldi or another grocery retailer.
“The company continues to have active dialogue with various buyers,” the company said in a statement.
Word of the closures came roughly a month after grocery giant Kroger Co. (NYSE: KR) announced that it would divest its ownership stake in Lucky’s, which was founded in Boulder by chefs Bo and Trish Sharon.
Kroger, the Cincinnati-based parent of King Soopers and City Market stores in Colorado, invested an undisclosed sum in Lucky’s to form a “strategic partnership” with the local chain in 2016. That partnership failed to live up Kroger’s expectations.
“As part of a portfolio review, we made the decision to evaluate strategic alternatives in relation to our investment in Lucky’s Market,” Gary Millerchip, Kroger’s senior vice president and chief financial officer, said during a quartler;y earnings conference call with investors last month. “As a result of this review, the company has decided to divest its interest in Lucky’s Market and recognized an impairment charge of $238 million in the third quarter.”
Neither Kroger nor Lucky’s had previously disclosed the size of its stake in Lucky’s. However, bankruptcy court documents peg that figure at 55 percent.
Last week, Lucky’s filed a closure and layoffs notice with Colorado’s Department of Labor and Employment for north Boulder grocery store location and its adjacent cafe and bake house. Those facilities employ a total of 98 workers.
Despite that filing, a Lucky’s official said the Fort Collins and north Boulder locations will remain open.
More than 200 employees at Lucky’s headquarters in Niwot — from office assistants to accountants to the company president — will lose their jobs as a result of Lucky’s downsizing, according to a WARN notice filed Friday with the Colorado Department of Labor and Employment.
The Worker Adjustment and Retraining Notification Act requires companies with more than 100 employees to file advance notices with their state labor departments when laying off more than half of their workforces at a single site.
“Lucky’s Market intends to permanently close its entire facility at 6328 Park Place, Niwot,” the WARN Notice letter said. “We anticipate that operations will cease no sooner than March 24 and no later than April 7. The facility closure is expected to be permanent. There are 202 employees at this facility. All employees at the facility will lose their employment as a result of the permanent closure.”
Balance sheet woes
“Historically, the [Lucky’s] underperforming stores are, among other things, in regions oversaturated with competition,” Lucky’s bankruptcy filing said. “Accordingly, continued operation of such underperforming stores no longer remains viable. [Lucky’s] estimate[s] that, absent closure, the closing stores will collectively generate approximately $30 million in operating losses for the fiscal year 2020.”
Lucky’s reported assets of $100 million to $500 million and liabilities of $500 to $1 billion its court filings.
Bankruptcy documents show the company has between 10,001 and 25,000 creditors. The firm’s largest creditors include United Natural Foods Inc., Black Business Investment Fund Inc., Sherwood Food Distributors, Snyder Construction Inc., Caito Foods Service, Quad/Graphics Inc., Gourmet Foods International, J Raymond Construction Corp., Bunzl Holdings Inc. and Schmid Construction.
Wilmington, Delaware attorney Christopher Ward with law firm Polsinelli PC is representing Lucky’s in the bankruptcies, which the firm has requested to administer jointly using the Lucky’s Market Parent Company entity. Ward did not respond to request from BizWest for comment.
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Correction: This story has been updated to remove an incorrect reference to five specific Lucky’s stores that could be bought by Aldi’s. It is Publix that plans to buy those locations.