Dive Brief:

• Save A Lot has sold its 51 stores in the Tampa, Florida, area to Fresh Encounter, an Ohio-based retailer that operates grocery stores under a number of banners, according to a press release. Fresh Encounter will operate the locations it is acquiring under the Save A Lot name.
• The sale continues Save A Lot’s effort to transition to a wholesale model through a relicensing program under which the company plans to sell more than 300 stores to other retailers through agreements under which the new owners will continue using the Save A Lot banner.
• ​Save A Lot’s agreement allows it to continue shoring up its finances by selling off company-owned stores without reducing the number of locations that carry the Save A Lot brand.

Dive Insight:

Save A Lot’s decision to sell its stores in the Tampa market reflects a continuing effort by the debt-hobbled grocery company to find its footing in the highly competitive discount grocery market — an environment that has been rough on its finances.

The company announced in April that it had cut $500 million in debt and brought in $350 million in new capital from a group of new and existing lenders. In a statement accompanying the announcement, Save A Lot CEO Kenneth McGrath noted that the company had been able to recapitalize through “a fully consensual and out-of-court agreement” that he called “a significant achievement.”

In January 2020, Save A Lot said it had reached an agreement with lenders to provide it with $138 million in capital and cut its indebtedness by more than $400 million.

Including the deal with Fresh Encounter, Save A Lot has completed seven relicensing transactions through which it has transferred 82 stores to new owners. The company, which counts 1,000 stores in 33 states and serves as a licensor and wholesale supplier to more than 200 independent retailers, expects to complete the relicensing program in 2021.

The deal nearly doubles the store count for Fresh Encounter, which currently operates 61 locations in Ohio under banners like Great Scot, Community Markets, Germantown Fresh Market and Needler’s Fresh Market, and introduces it to a fast-growing and competitive Tampa grocery market.

Save A Lot said its licensing arrangements with other retailers improve its ability to serve individual markets because those companies “have the flexibility necessary to respond to the needs of each community they serve,” and added that each owner has the ability to customize its assortment in response to local market conditions. The company will continue to operate 21 stores in its home market of St. Louis, "where it will continue to develop and launch new innovations as a testing ground to help its retail partners succeed," according to the announcement.

Save A Lot is looking to improve its finances and retain its brand in the face of intense competition from deep-pocketed rivals like Aldi and Lidl, both of which have been taking aggressive steps to expand. Aldi now has more than 2,000 U.S. stores, while Lidl expects to have more than 150 locations in the United States by the end of the year.

PJ Solomon, which has worked with grocers including KB US Holdings, Fairway Market and Southeastern Grocers, served as Save A Lot’s financial advisor as it structured its deal with Fresh Encounter.