Wild Oats seems like an investment with potential to me. Although it’s struggling a bit now, it does stand for something in the grocery sector. And it earns its profits not from manufacturer trade dollars but on the merchandise it actually sells. I agree with the comments in MarketWatch – it has expansion potential.

Pathmark I’m far less optimistic about – on its own. It’s a mediocre performer in the vast middle of a hurting sector – the low price supermarket. But it has some pretty nice real estate.

So here’s a wild speculation: Burkle gains partial control of both firms and engineers a sale of prime Pathmark locations to Wild Oats. He makes money on both investments and transforms WO into a potential powerhouse in the organic/fresh side of the grocery business.

Fellow Brain-trusters: is this a nutty scenario?

Pathmark is interesting because, of all of the financially weak supermarket chains, Pathmark actually does a decent amount of sales volume per unit. Pathmark also faces incredibly weak competition, such as A&P, Albertsons, Safeway, and Ahold, all of which appear crippled. Also, they have very limited Wal-Mart Supercenter competition. If Pathmark was operating low volume stores like A&P or Albertsons, then I would say it was a waste of time. But since Pathmark is doing over $500k per week per store on average, this makes for a good start when buying a chain. We all know A&P, Albertsons, and Safeway cannot continue to operate their weakened units forever, so Pathmark would be in a good position to absorb their volume when those stores start closing. Most of the market studies I do that have Whole Foods, Trader Joe’s and Wild Oats in the trade area, generally Wild Oats is the weakest of the three. Still, their sales per square foot is much higher compared to regular supermarkets and they are in a growing food segment.… Read more »

It is interesting that both chains, being in different channels, suffer from the same problem… indecision. Pathmark at one time was the 800 pound merchandising gorilla in the New York market, and unfortunately, few remember those days. Wild Oats has been a patchwork of acquisitions, and a shotgun merchandising program for many years… both chains know it and have known it for a while. Ron Burkle’s investment and, in the case of the hiring of Bob Miller, can only finally speed up the process for both companies to make a decision as to what their future customers will experience, if at all.

Ron is being particularly insightful today.

It will be difficult to dress up Pathmark and make it attractive for a sale, so I have to imagine Burkle is getting a large stake in the company for his investment and will have a lot of influence over the operation in the future. He’s got his work cut out for him. Every market share number I’ve seen over the past five years has Pathmark sinking, and they now stand at a distant #2 behind ShopRite/Wakefern. Not that A&P and Stop and Shop have done all that much to take advantage of the decline. All of this in a market that hasn’t felt the full impact of Wal-Mart yet.

One more thing, I’d look for a shake-up at the top within 12 months at both companies,