Friday, November 20, 2009

Parent of Quality Markets files for bankruptcy

Parent of Quality Markets files for bankruptcy
By Samantha Maziarz Christmann

Penn Traffic, parent company of Quality Markets grocery stores, filed Chapter 11 bankruptcy protection Wednesday for the third time in a decade.

The Syracuse-based company is seeking to sell all of its assets, including its 79 supermarket locations. The company operates 13 Quality Markets in Western New York at Attica, Dunkirk, Ellicottville, Falconer, Frewsburg, Jamestown, Lakewood, Lockport, Mayville, Randolph, Silver Creek, Westfield and Williamsville.

Its stores will remain open for business, according to a statement by Gregory J. Young, the company’s president and chief executive officer. The company said it will also continue paying its 5,700 employees and maintain their benefits. It indicated assets of $150.4 million and debt of $136.9 million in court documents.

Burt Flickinger III, managing partner of retail consulting firm Strategic Research Group, said there is “reasonable hope” the company could move forward profitably under new ownership and management with fewer stores.

“It’s rare for a company to go into bankruptcy three times and survive. Normally they would liquidate,” he said. “With good leadership and financing, [Penn Traffic] could be viable as a midsized supermarket chain. [But] they would have to reject two to three dozen store leases.”

Unstable, out-of-town management contributed greatly to the company’s problems, as did weak ads and a lack of support for local suppliers, according to analysis by Strategic Research Group.

On the upside, its research found top-notch customer service and staff at Penn Traffic stores, despite the ongoing corporate crises. Flickinger called the relationship between the workers’ union, UFCW Local One in Utica, and Penn Traffic one of the most constructive and productive in the United States and Canada.

Should the company be broken up, several grocery chains are likely to be interested in a piece of the action.

Tops Friendly Markets would “certainly be a logical bidder” for a number of Penn Traffic’s stores, Flickinger said. Delhaize USA, the Belgian parent of Hannaford Bros. Co; Price Chopper owner Golub; Pennsylvania- based Weis Markets; Giant Eagle; and Olean Wholesale Grocery Co-Op are likely contenders to buy one or two stores as well.

“It’s a sad day. We’ve been through a number of their stores,” said Flickinger. “They still have a lot of good locations; their staff is very strong; their customer service is excellent; their conditions and standards are excellent.”

Penn Traffic cited the economic downturn, fierce competition in the grocery business and legal troubles as contributing factors to the company’s bankruptcy.

The company lost $17.6 million last year, an improvement over its $42 million losses in 2007. It closed 20 stores, including one in Dunkirk, and sold off its wholesale division earlier this year.

In 2005, the company emerged from a nearly two-year bankruptcy reorganization but has continued to lose money. It also filed for bankruptcy in 1999. In 2007, two Penn Traffic executives were charged in federal court with artificially inflating the company’s earnings between 2001 and 2003.

Penn Traffic has supermarkets under the names Bi-Lo, P&C and Quality in New York, Pennsylvania, Vermont and New Hampshire.

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