Roundy’s files for IPO

The parent company of Milwaukee-based Roundy’s Supermarkets Inc., announced that it has filed plans with the U.S. Securities and Exchange Commission (SEC) for an initial public offering (IPO) of shares of its common stock.
The company said the number of shares to be offered and the price range of the offering have not yet been determined. In its SEC filing, the company said it hopes to raise up to $230 million in the public stock sale.
The company has 158 grocery stores in Wisconsin, Minnesota and Illinois. The firm has 60 stores in the Milwaukee area, most of them Pick ‘n Save stores.
In its SEC filing, the company said it has a 55 percent market share in the Milwaukee area.
However, the company’s Milwaukee market share has been slipping in recent years, according to David Livingston, a grocery industry analyst and a former market research manager for Roundy’s.
About 10-12 years ago, Roundy’s had a huge market share in the Milwaukee area and was considered the low-price option for grocery shopping, Livingston said. But in recent years Walmart, Aldi and Woodman’s have opened several stores in the Milwaukee area, cutting into Roundy’s market share, offering lower prices. In addition, Target has increased its grocery offerings, providing even more competition for Roundy’s.
“There’s a lot of competition coming into the market, and it’s pretty good competition,” Livingston said.
Roundy’s acquired several former Jewel, Kohl’s and Sentry stores, but that only resulted in a slight increase in market share and cannibalized some of its existing stores, Livingston said.
Roundy’s is currently owned by Chicago private equity firm Willis Stein & Partners. The company has been for sale since 2007, said Livingston. Livingston said he has worked with several potential buyers of Roundy’s, but “everybody has passed.”
Willis Stein & Partners tried to sell the company for about $2 billion, Livingston said. Therefore, a $230 million stock sale would represent “a small percentage of the company.”
“I think they’re trying to keep the company afloat by injecting some cash,” Livingston said. “They wouldn’t be going out to raise capital unless they needed it. I think they’re trying to take advantage of an improving stock market. It’s probably going to keep them from going further into debt.”
In its SEC filing, Roundy’s says its growth strategy includes plans to:
“Maintain our strong operating margins through both an aggressive pursuit of cost-saving strategies and a continued focus on shifting our sales mix toward higher margin products.”
“Pursue same-store sales growth by continuing to focus on price competitiveness, improving our marketing efforts and enhancing and expanding our private label, perishable and prepared food offerings.”
The company also said it plans to continue its expansion into the Chicago market. The company entered that market last year opening its first Mariano’s Fresh Market store in Arlington Heights, Ill., and now has four stores in the Chicago area. The company says it plans to open four to five more stores in the Chicago area during the next five years.
“Given its favorable competitive dynamics and attractive demographics, including a large population and average household income that exceeds the national average, we believe the Chicago market provides us with a compelling expansion opportunity,” the company said in its SEC filing.

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