BIG CHANGES IN RETAIL

Written by: Gilli Zofan

Gilli Zofan brings over 16 years of experience to the real estate industry focusing on both the leasing and sale of retail properties. His vast knowledge of the industry makes him an expert in the field. Keep reading for Gilli’s insight on Aldi’s expansion plan.

CNBC’s recent article, Aldi is getting bigger. Here’s why the no-frills German grocer is looking to the Southern U.S. for growth, focused on Aldi’s plan to aggressively grow. “The German retailer announced this week that it plans to acquire about 400 Winn-Dixie and Harveys Supermarket locations across the Southern U.S. As part of the deal, it would take over operations of the stores, which are in Florida, Alabama, Georgia, Louisiana and Mississippi, and put at least some of them under the Aldi name.”

Mergers seem to be the next big move with well-capitalized retailers, landlords, and investment funds finding mergers & acquisitions (M&A) as the best option due to limited inventory and the need for continued growth and maximized return for their shareholders.

At the same time, this is the best option to provide the highest return for the companies being acquired, as often with the current high interest rates, construction costs, labor and overall operating costs, this option provides the best return in the current marketplace.

In the past month we have seen several mergers, including ALDI USA announcing the purchase of Winn-Dixie, RPT Realty merging with Kimco Realty Corporation, and KSL Capital Partners acquiring Hersha Hospitality Trust. In each aforementioned merger, the new company receives an immediate boost in size and footprint, while allowing them to enter new markets that they may not already operate in.

With the Aldi announcement and the heightened attention on groceries since the pandemic, this acquisition is sure to receive a lot of attention and poses the following questions:

- Will they close stores?

- Will they keep the Winn-Dixie brand?

- Will some stores become Trader Joe's?

- How will they further capitalize on the private labels of both brands?

With many unknowns yet to be answered, one thing is for certain, the grocery sector continues to be strong, and the best in class continue to grow, even in the current economic environment.