American Stores
American Stores Company, Inc. was an American public corporation and a holding company which ran chains of supermarkets and drugstores in the United States from 1917 through 1998. The company was incorporated in 1917 when The Acme Tea Company merged with four small Philadelphia-area grocery stores to form American Stores. In the following eight decades, the company would expand to 1,575 food and drugstores in 38 states with $20 billion in annual sales in 1998.
History
American Stores was formed in 1917 with the merger of five separate grocery stores. At the time, the Acme Tea Company had 433 stores; the S. C. Childs Company had 268 stores; the James Bell Company had 214; Robinson & Crawford had 186 stores; and the George M. Dunlap Company had 122. The leadership from Robinson & Crawford was put in charge of the combined 1,223-store chain.By 1925, American Stores had grown to nearly 1,800 stores. In 1928, the American Stores Company purchased 305 grocery and meat stores in northern New Jersey from the United States Stores Corporation.
In 1946, a proposed acquisition of Grand Union supermarkets was turned down by Grand Union stockholders.
1960s-1970s
In 1961, American Stores company acquired California's Alpha Beta chain of supermarkets. In the 1970s, in order to compete with lower priced grocery retailers such as ShopRite and Pathmark, Acme Markets launched its Super Saver discount grocery chain in Pennsylvania.American Stores itself was acquired in 1979 by the Skaggs Companies, Inc. The merged company was headquartered at Skaggs' base in Salt Lake City, Utah. However, it took the American Stores name.
American Stores was by far the larger organization, with 758 supermarkets, 139 drugstores, 53 restaurants, and 9 general merchandise stores in nine states when compared to the 241 Skaggs stores. Although the resulting entity bore the American Stores Company name, it was controlled by Skaggs management headed by Leonard S. Skaggs Jr. more familiarly known as Sam Skaggs.
Stores in several markets having both an Alpha Beta supermarket and a Skaggs Drug Center were combined to combination food and drug stores and re-branded Skaggs Alpha Beta.
1980s
American Stores posted $83 million in earnings on sales of nearly $8 billion in 1983. But its presence was still weak in the Midwest, New England, and Florida.Acquisition of the Jewel Companies
In June 1984, American Stores acquired Jewel Companies, Inc. for $1.1 billion. L. S. Skaggs would be chairman and CEO of the combined company, while Jewel chairman Weston Christopherson and other executives were forced out. Skaggs had previously discussed a merger with the company in 1966 and again in 1978.To help raise cash for the deal, American Stores sold its Rea and Derick, Inc. subsidiary of 134 drugstores in December 1984 to People's Drug, a division of Imasco Limited. It also sold 33 Alpha Beta grocery stores in Arizona sold to ABCO Foods. Another 22 Alpha Beta grocery stores and support facilities in northern California were also sold.
The acquisition of the Jewel Companies, Inc. consisted of the Illinois-based Jewel Food Stores supermarket chain and Osco Drug, Inc., Massachusetts-based Star Market, California-based Sav-on Drugs, Montana-based Buttrey Food Stores, and White Hen. The Osco Drug and Sav-on Drugs chains were previously founded by the Skaggs family. This merger added 193 supermarkets, 358 drugstores, 140 combination food and drug stores, 301 convenience stores, and 132 discount stores to American Stores' holdings.
The company found itself in legal trouble through its new subsidiary. A salmonella food-poisoning outbreak affecting some 20,000 people in the Midwest was traced to Jewel's Hillfarm Dairy that supplied tainted milk to Jewel stores in March and April 1985. In 1987, Jewel was found not liable for punitive damages in Illinois Cook County Circuit Court but agreed to pay compensatory damages estimated at $35 to $40 million.
In 1985, American Stores sold the White Hen chain, since convenience stores did not fit into the company's plans. Buttrey Food & Drug and Star Market were put up for sale in order to raise capital and pay down debt. Although the company continued to operate these subsidiaries, investment in remodeling and new construction for these stores and for Acme Markets was minimal throughout the 1980s.
By 1987, American Stores Company was the largest drug retailer in the United States, but only the third-largest grocery retailer and underperforming its peers. In October 1987, the company exited the Idaho and Washington drugstore markets with the sale of 25 Osco Drug units to Pay Less Drug Stores.
Sav-on name change
Following the acquisition of Jewel, American Stores used the Osco Drugs name in its effort to build a nationwide network of pharmacies. In February 1985, it was announced that the Skaggs Drug Center stores located in the Northwest would be rebranded under the Osco name. In August 1986, the company's 184 Sav-on stores in California were also renamed Osco Drug, giving the chain 645 stores nationwide.The name 'Osco' did not resonate well with Sav-on's southern California customer base. By 1989, American Stores had made the decision to change the former Sav-on stores back to their original name. Rumors at the time claimed the reason was that 'Osco' has the same pronunciation as the Spanish word 'asco', which means disgust or loathing, a considerable factor within southern California’s heavily Hispanic market. This explanation for the name change was refuted by American Stores.
Acquisition of Lucky Stores
In March 1988, American Stores made an unsolicited tender offer for Lucky Stores, an Alpha Beta competitor noted for high efficiency and low prices. American Stores’ Alpha Beta chain in California was struggling, plagued by high prices and a reputation for poor service. At the time, Lucky was California's leading grocery retailer, due in part that it was the only chain with a significant presence in both northern California and southern California.Lucky refused American Stores' first offer. Within a month, American Stores proposed to up its bid if Lucky would agree to a friendly takeover. Again Lucky management rejected the offer as inadequate and was said to be contemplating defensive strategies. Later, American Stores upped its bid to $2.5 billion, or $65 per share. Lucky accepted and American Stores was on track to become the largest supermarket chain in the United States, over the Kroger and Safeway chains.
The acquisition included then Dublin, California-based Lucky Stores, with stores in California, Nevada, and Arizona; Tampa-based Kash n' Karry, with stores in Florida; and a minority interest in Milan, Illinois-based Eagle Food Centers.
In August 1988, California Attorney General John Van de Kamp asked the Federal Trade Commission to void the sale, claiming that a Lucky-Alpha Beta juggernaut would cost California consumers $400 million by reducing competition. The Federal Trade Commission approved the merger and Van de Kamp then initiated a lawsuit against American Stores to stop it. In September 1988, a federal judge in Los Angeles issued a preliminary injunction against the merger. At the same time, the FTC ordered the companies to divest 37 Alpha Beta and Lucky stores to appease antitrust concerns. American Stores appealed, and in April 1989, a Ninth Circuit panel in San Francisco overturned the injunction. Van de Kamp appealed this reversal to the U.S. Supreme Court. Meanwhile, American Stores continued to plan its integration of Lucky while it waited for the district court to lift the injunction as ordered by the Ninth Circuit.
However, on August 22, 1989, Associate Justice Sandra Day O'Connor, in her capacity as Circuit Justice for the Ninth Circuit, issued an interlocutory order staying the Ninth Circuit's issuance of its mandate back to the district court, which kept the preliminary injunction in place. After oral argument on January 19, the U.S. Supreme Court ultimately ruled in favor of the state on April 30, 1990.
Wishing to avoid additional lengthy litigation, the following month American Stores reached an agreement with Van de Kamp whereby the company was allowed to convert 14 Alpha Beta stores to the Lucky name but also had to sell 161 southern California stores within five years. The deal put no restrictions on American Stores' future growth in California and did not require state approval of the buyer or terms of the sale.
In 1989, Kash n' Karry was acquired by its management from American Stores for $305 million. American Stores also sold the minority interest in Eagle Food Centers that it had acquired from Lucky and sold it to New York-based Odyssey Partners.
Headquarters move to Southern California
American Stores relocated its corporate headquarters from Salt Lake City to Irvine, California, in July 1988. At the time, the company indicated the reason for the move was to place the headquarters in one of the company's major operating market areas and therefore closer to its business interests. However, the corporate headquarters was moved back to Salt Lake City in 1989 with little explanation.Jewel-Osco Florida
On March 16, 1989, the company opened a 75,000-square-foot Jewel-Osco combination store in Largo, Florida. This marked American Stores’ re-entry into the Southeast after an absence of nearly two decades. Mark S. Skaggs, son of L.S. Skaggs, was president of the new Jewel-Osco of Florida division.This was a wholly separate division of the company and was not part of the Jewel Food Stores chain in the midwest or the Osco/American Drug Stores subsidiary. Unlike the combination stores in the midwest, where Jewel ran the food side of the combination stores and Osco ran the drug side, the Florida stores were run by a one overall manager, similar to the way a Skaggs Alpha Beta store was managed.
Only six Jewel-Osco stores were opened in Florida and all were sold to Albertsons in 1992 as part of a $300 million deal to offload 74 stores and an Oklahoma distribution center. As a result, American left Texas, Arkansas, Oklahoma, and Florida.