Brookings-based C&K Market Inc. filed for the protection of bankruptcy court Tuesday, telling the court it plans to sell or close about one-third of its stores — including two in Lane County — and cut its staff of more than 2,300 full- and part-time employees by about 20 percent.
The company operates 60 grocery stores in Oregon and Northern California under the names of Ray’s Food Place, Shop Smart, C&K Market and LoBuck$.
Among the stores on its sell-or-close list are Ray’s stores in Creswell and Pleasant Hill.
The company does not have a set timeline for divesting itself of the stores, but anticipates it will happen by the end of the year, spokesman Grant Lunde said.
“Entering Chapter 11 was a difficult decision for our family,” said Doug Nidiffer, chairman of the C&K board. “We seriously considered our options, and believe this approach is in the best interest of many of the communities we’ve served over the years. We will retain about two-thirds of our 60 stores, tighten our corporate structure, and shed legacy costs.”
The legacy costs are those associated with such things as buildings that are no longer being used by the company, Lunde said.
Company officials said they expect to emerge from the bankruptcy reorganization next year “as a stronger, leaner company.”
The company said it intends to operate its business as usual during the Chapter 11 proceeding.
The issues that led to the bankruptcy filing were rooted in expansion — by both C&K and its larger competitors, according to Edward Hostmann, president of Edward Hostmann Inc., which has been acting as the chief restructuring officer of C&K Market since July 8.
C&K has historically operated in small rural communities, Hostmann said, where it often was not only the sole grocery store operating in a community but the only one for miles around,
But as C&K expanded into more populated areas, and large discounters like Costco and Walmart expanded into less-populated areas and into the grocery business, they met in the middle. C&K faced more competition and more pressure on its sales and profit margins, Hostmann said.
“Currently, most of (C&K’s) stores are located within 40 miles of a large discount grocery operation such as Walmart or Costco,” Hostmann said in court filings. “In the last half of 2012, new ‘Super Walmarts’ negatively affected at least 30 of (C&K’s) markets. As a result of the evolving marketplace, several of C&K’s stores are no longer viable.”
C&K has been steadily closing what it described as under-performing stores in recent months, including a C&K Market in Waldport and one in Walterville.
In late October, it announced it would sell its 15 pharmacies in order to focus on its core business of community grocery stores. So far, it has sold 13 of the 15 pharmacies to Albertsons, Safeway, Rite Aid and Coastal Pharmacies.
C&K’s bankruptcy filing states that it has liabilities of between $100 million and $500 million, and assets of $10 million to $50 million.
Sale of the pharmacies allowed C&K to cut its bank debt from $37 million to $24 million, Hostmann said. In addition to the bank, C&K owes $3.4 million to five secured creditors who sold real estate to the company and $45 million to unsecured creditors, mainly two California private equity firms. Unsecured debt is not backed up by collateral such as real estate.
Also among the 20 largest unsecured creditors is Eugene-based Bigfoot Beverages, which is owed about $414,000.
The company’s bankruptcy filing says it expects to have sufficient funds to pay both secured and unsecured creditors after the restructuring.
“C&K still maintains at least 40 grocery stores with proven profitability in markets that will continue to prosper,” Hostmann told the court. “(C&K’s) restructuring will enable it to emerge as a viable entity that will continue to contribute to the communities in which it operates.”
“The positive news is that we will put our energies into the remaining stores with our family-friendly service,” company President Gregory Sandeno said.