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PLEASANTON, Calif. — Safeway Inc.’s plan to divest its Dominick’s grocery chain and leave the Chicago market furthers its strategy of focusing on core assets, according to company executives.
Safeway Inc.’s plan to divest its Dominick’s grocery chain and leave the Chicago market furthers its strategy of focusing on core assets, according to company executives.
Earlier this month Safeway said it sold four Dominick’s supermarkets in greater Chicago to New Albertsons Inc., which operates Jewel-Osco food and drug stores and is part of AB Acquisition Inc., the parent of Albertsons. Plans call for Safeway to sell all 72 Dominick’s stores by early next year.
Safeway reported that it reached the decision to pull out of Chicago at the end of the third quarter and that it aims to use proceeds from the sale to buy back shares and invest in growth opportunities. Safeway acquired Dominick’s in November 1998.
"The decision to exit the Chicago market is the result of our review process," Safeway president and chief executive officer Robert Edwards told analysts in a conference call on third quarter results. "The disposition of our assets in the Chicago market will eliminate a noticeable drag on our financial results and a significant drain on our resources, allowing us to focus on our remaining operations."
Edwards explained that Safeway began reassessing its business soon after he took the CEO reins in mid-May from predecessor Steve Burd. "The scope of the initiative is broad," Edwards said in the call, "and we are focused on exploring a number of strategic initiatives for profitable growth and improving our core grocery retail business."
In June, Safeway unveiled a deal to sell Canada Safeway Ltd. for $5.8 billion (Canadian) to Sobeys Inc. The agreement, due to close in the fourth quarter, includes 213 Safeway supermarkets in western Canada, 199 in-store pharmacies, 62 on-site fuel stations, 10 liquor stores, four distribution centers and 12 manufacturing plants.
Edwards said in the analyst call that the sale of Dominick’s will result in a sizable tax loss that will help Safeway offset some of the tax from the Canada Safeway sale.
"We are confident that our strong store base, brand positioning and sales momentum, built from recent retail and loyalty initiatives, give us the foundation to accelerate profitable growth in the future," he noted.
