Schnucks Announces Plan to Sell Kansas City Stores to Hy-Vee, Inc

COMPANY PRESS RELEASE: Schnuck Markets, Inc. will sell its seven stores in metro Kansas City to Hy-Vee, Inc. of West Des Moines, Iowa, effective Aug. 25. Terms of the asset purchase, pre-approved by the Federal Trade Commission, were not disclosed.

Virtually all of Schnucks' 900 associates working in its Kansas City stores will be offered comparable positions with Hy-Vee.

"We appreciate the dedication of our Kansas City employees since we entered the market in 1991 and the opportunity to serve our Kansas City customers. While it's difficult to make the decision to leave the area, we realized we were at a crossroads with two options," said Craig D. Schnuck, chairman and chief executive officer. "One was to make a substantial investment in new stores and sales promotion to expand our Kansas City presence in order to reach a sufficient size and scale to be profitable. The other was to see if another supermarket operator might want to grow by buying our operation."

Two other factors contributed to Schnucks' decision to sell. One was the over-stored condition of the Kansas City grocery market, and the tendency of local supermarket operators to build stores in growth areas before the surrounding population is large enough to support a profitable operation. The other was the high cost of transporting products from Schnucks' St. Louis warehouses to its Kansas City stores. Those costs are significantly higher on a per-item basis than in most of Schnucks' other markets.

Schnucks received a strong response from potential buyers, and pursued discussions with the highest bidders this summer.

"We decided on Hy-Vee's offer because it makes everybody a winner. Our outstanding employees will retain their jobs, our customers will continue to have great stores in which to shop, and we are able to recoup our investment," Schnuck said. "We'll use the proceeds to fund our ongoing expansion in other markets."

Scott C. Schnuck, president and chief operating officer, added, "We're confident our employees will be joining a well-managed and progressive company with solid Midwestern values similar to our own. Hy-Vee offers a bright and secure future working in stores where customers come first."