Thursday, November 9, 2006
Brown and Cole Stores, LLC (B&C), a supermarket chain jointly owned by Associated Grocers, Inc. (AG) and Brown and Cole, Inc., filed a chapter 11 petition in federal bankruptcy court in Seattle Nov. 7. The company operates the Food Pavilion stores in Sunnyside and Yakima.
The company expects to close four stores, with the Sunnyside Food Pavilion on the list, unless buyers for the stores can be found.
According to a press release sent out by B&C, the current situation is a result of three factors: the discontinuance of dividends on B&C's ownership investment in the company's wholesaler, spiraling health care costs and Wal-Mart.
B&C had been receiving regular dividends and share redemption payments from AG but that stopped in 1999. Before that the company had been receiving approximately $2 million each year from AG.
B&C's health care costs have nearly doubled over a two to three year period, which caused more hardships on the company's cash flows.
According to the press release, the tipping point came with Wal-Mart's saturation of markets in Washington, causing B&C to close four large stores in the Tri-Cities and Arlington areas. The company has continued to pay rent on the facilities due to being unable to find any replacement tenants. This has put an extra burden on the company's finances.
"We pay wages that are 50 percent higher than Wal-Mart and make health care payments on 95 percent of our workers, more than double Wal-Mart's commitment," Brown and Cole Stores President Craig Cole said. "It's hard to remain profitable competing with a low-wage, non-union operator like that, but fixing our financial problems on the backs of our employees was never an option that we were willing to pursue."
Cole said competing with Wal-Mart is very doable, except when Wal-Mart over-stores a market. Cole asserts Wal-Mart's long-term strategy has been to over saturate markets with surplus retail capacity so smaller companies will be driven out of the market.
Wal-Mart has 44 stores in Washington state and has announced plans for several more.
The goal of the chapter 11 bankruptcy is to allow the company time to work with its creditors on a plan to reorganize the company's finances and to deal with such matters as surplus building lease expenses.
"This is a humbling but necessary action," Cole said. "We're not giving up the entire industry to the global chains. Consumers deserve choice in the market place and retail workers deserve a chance to earn middle class wages and benefits."
Jim Austin, legal council for B&C, said the Sunnyside Food Pavilion hasn't had any prospective buyers as of yet but the company is actively looking for buyers. He said more likely than not the store will close but will remain open for the time being.
Austin said a decision on when to close the store if a buyer can't be found will be made in the near future.