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WIKI ANALYSIS
Arden Group (NASDAQ: ARDNA) operates a chain of supermarkets in Southern California through its subsidiary Gelson's Markets. Arden managed 18 stores as of January 2, 2010.
Arden Group, Inc. (Company or Arden), is a holding company which conducts operations through its wholly-owned subsidiary, Arden-Mayfair, Inc. (Arden-Mayfair) and Arden-Mayfair's wholly-owned subsidiary, Gelson's Markets (Gelson's) which operates supermarkets in Southern California.
Market Operations
As of January 1, 2011, Gelson's operated eighteen full-service supermarkets in Southern California, which carry both perishable and dry grocery products. Gelson's offers a broad selection of local and national brands as well as a limited number of private label items. Gelson's targets the consumer who values superior customer service, merchandise, presentation and selection. Gelson's also operates a distribution center in the City of Commerce, California.
Company Overview
The company's founder, Bernard Briskin, is 87 years old and still behind the company's major decisions. He has significantly reduced his ownership from 70% to 60% over the past few years through stocks divestment.
Business Financials
In 2009, ARDNA earned a total of $431 million in total revenues. This was a decline from its 2008 total revenues of $479 million. Unsurprisingly, this had an adverse effect on ARDNA's net income situation. Between 2008 and 2009, ARDNA's net income declined from $25 million in 2008 to a net income of $22 million in 2009.
Business Segments
Supermarket Outlets
Arden Group operates 18 grocery stores under the name Gelson's Market. All stores are located in high income areas in Greater Los Angeles.[1] Additionally, all stores offer a branded Gelson's Market credit card to qualified customers.
Distribution
Arden Group leases a central warehouse and small truck fleet to supply its stores. Nearly half of all supermarket products are distributed through these warehouse leased by ARDNA; the rest are distributed directly by the producer. With a small number of stores in close geographical proximity to each other, Arden Group is able to minimize distribution costs and finds it just as cost efficient to pay some producers to deliver inventory directly to stores rather than to distribute the inventory itself.
Real Estate
Arden Group operates a wholly-owned subsidiary called Mayfair Realty. Mayfair Realty owns two Gelson's Market properties and a shopping center in which a Gelson's Market is located. The remaining properties are leased from third parties for an average period of 20 years.
Key Trends, Risks, and Forces
Arden Group Grows Revenue Solely Through Raising Prices, A Strategy That May Be Unsustainable in the Future
Arden Group's revenue growth was a result of higher product prices. However, this was partially offset by a reduced customer count. As food prices continue to rise - up an annualized rate of 6.1% since 2008 - the company may not be able to continue to raise prices without losing customers and shrinking revenue.[2] Although the wealthiest of Arden Group's customers may still buy at Gelson's Market, middle income customers may leave to lower priced alternatives such as Kroger Company's Ralph's or Safeway's Vons.
Competition
With its focus on high end products, Arden Group's primary competition is other premium grocers.
- Whole Foods Market (WFMI), with 26 stores in Southern California, is Arden Group's largest competition in terms of product selection and location.[3]
- Safeway (SWY), operating under the banner Vons in Southern California, competes with Arden Group to a lesser degree. Although it is one of the large Southern California grocers with 325 stores, Vons does not have as large a selection of premium products as Arden Group and targets a lower income customer.[4]
- Kroger Company (KR), operating under the banner Ralph's in Southern California, competes with Arden Group to a lesser degree. Although it is one of the large California grocers, with 386 stores throughout the state, Ralph's does not have as large a selection of premium products as Arden Group and targets a lower income customer.[5]
References
- ↑ ARDNA 2007 10-K, Item 1, Page 1
- ↑ [1] Consumer Price Index Summary
- ↑ Whole Foods Online
- ↑ Vons.com
- ↑ Grocery Store Banners By State
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