Tidyman’s in transition

The chief executive officer of the Spokane-based Tidyman’s grocery chain said the company has finished closing unprofitable stores and plans to open several new stores that will appeal to price-conscious consumers.

Beginning last June, Tidyman’s closed six stores in Washington, Idaho and Montana. That included Tidyman’s stores in north Spokane, Moscow, Lewiston, Coeur d’Alene and Missoula. The sixth was a Helena store called County Market that Tidyman’s operated. The company closed another County Market in Billings three years ago.

Tidyman’s CEO Mike Davis said Tidyman’s will rebuild its store at 6401 N. Cedar, but the other stores were closed because they were either losing money or not producing desired sales. In addition, the timing of the closures has coincided with opportunities for Tidyman’s to sell its property. The property in Coeur d’Alene, for example, was sold before the store’s closure last month, Davis said.

The closures have reduced the number of stores from 21 three years ago to 14 today. The number of employees has dropped in that time from 1,350 to about 900, Davis said.

“This has allowed us to reduce our debt substantially. Eventually, our long-term strategy is to consolidate our resources into markets where we have stronger market share,” Davis said, adding that Spokane would fit that description.

Smaller grocery companies have been hit hard by Wal-Mart, said observers of the regional industry. In February, Bellingham-based Brown & Cole Stores announced that it would close eight stores, mostly in markets heavily impacted by Wal-Mart.

Wal-Mart has Supercenters – stores that include groceries – in Post Falls and Spokane Valley and is in the process of converting its north Spokane store to add a supermarket. In addition, applications are pending for stores in Pullman and Hayden.

“Usually when Wal-Mart comes into a market, they take about 30 percent” of the grocery business, said Dean Sonnenberg, CEO of URM Stores, Rosauers’ parent company. “Our market has not even begun to see the amount of impact Wal-Mart will have when they begin expanding. Undoubtedly, that would create some fallout.”

Davis said Tidyman’s decisions have been driven by more than Wal-Mart. He said “tremendous” retail square footage has been developed over the last five years. In addition, different types of stores, including drug stores and discount shops, have expanded into food and beverage sales, he said.

“You can go into Home Depot and buy soda pop,” Davis said.

To more effectively compete, Davis said, Tidyman’s has acquired the license to operate Save-A-Lot grocery stores in this market from its corporate partner, Supervalu. In addition to a supply division, Supervalu operates more than 1,500 supermarkets nationwide under nine different store names. Tidyman’s merged with Supervalu in 1998. Tidyman’s, which is owned by employees through an Employee Stock Ownership Program, retained 60 percent of the company, with Supervalu acquiring 40 percent.

Now Supervalu is interested in entering the Pacific Northwest, Davis said, and is looking for a distribution warehouse location, most likely on the west side of the state.

Within the next 18 months, Davis said, Tidyman’s plans to open three to six Save-A-Lot stores in Spokane County.

The stores are smaller than traditional grocery stores, at about 15,000 square feet, and only carry about 2,000 items. However, Davis said, they discount prices by up to 40 percent.

Nationwide, smaller chains are being forced to reinvent themselves to more effectively compete, primarily with Wal-Mart, said Clif Finch, vice president of the Washington Food Industry, a trade association. The successful ones have undercut Wal-Mart’s prices on key food items and tailored product lines to their communities, he said.

However, Finch said the industry expects more consolidation in the future.

“In this state, you haven’t seen the fallout yet,” Finch said. “Wal-Mart has just started to become a major presence in this state in terms of food and beverage. It’s just cutthroat competition no matter where you go.”