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Bashas' files Chapter 11 bankruptcy

Bashas' Inc., the largest family-owned grocery chain in Arizona, has filed for Chapter 11 bankruptcy protection, blaming the state's stagnating economy, tight credit markets and intense competition.

The 77-year-old Chandler, Ariz.-based company has obtained $45 million in financing and will continue operating as usual.

"We are not winding down operations, and it is not our intention to sell to another entity," Bashas' President and Chief Operating Officer Mike Proulx said in a press release. "It's our intention to operate our business so as not to impact our member (employee) wages or benefits and to continue to provide fresh products at competitive prices for our customers."

The company plans to close 10 Arizona stores in July in addition to the five it closed earlier this year, bringing the total to slightly more than 140 in Arizona, California and New Mexico. Bashas' laid off 200 part-time employees in February.

Bashas' spokeswoman Kristy Nied said the company is "looking at all options" to decide whether to close more stores or lay off additional workers.

The company estimated assets and liabilities at $100 million to $500 million in its filing.

The grocer has been hit hard by the worsening economy in Arizona as well as increasing competition from such supermarket chains as Walmart and Kroger Co.

"Arizona is one of the most competitive grocery retail markets in the country," Nied said.

That's certainly a factor, according to Jim Hertel, managing partner at retail consulting firm Willard Bishop in Barrington, Ill. "Phoenix is one of the top-ranked competitive areas," Hertel said.

"Wal-Mart and Kroger particularly are very sharp pricers and they have very good private brands," Hertel said. "If you're not responsive enough fast enough, people will cut you slack for a little while, but pricing is key."

For local grocery stores to stay in the game, "there are a lot of little things they need to do," such as spending on promotion and keeping stores clean and up to date, he said.

Bashas' decision last March to lower prices on 10,000 products was a good move, but probably hasn't had enough time to be effective yet, Hertel said.

Bashas' isn't the only local grocery chain to seek bankruptcy protection. In March, BI-LO Inc., a Mauldin, S.C.-based grocery chain owned by private-equity investor Lone Star Funds, filed for Chapter 11 bankruptcy protection. BI-LO has 215 supermarkets in South Carolina, North Carolina, Georgia and Tennessee and employs 15,500.

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