Safeway Is Ditching Canada and Chicago
Safeway Inc. (NYSE:SWY) shares are up despite the fact that the retailer reported a 58 percent drop in profit for the third quarter, and the reason for the Safeway optimism is that the company announced it’s leaving Chicago by the beginning of next year.
The 72 Dominick’s supermarkets Safeway owns in Chicago will give the company a $400 million to $450 million cash tax benefit. According to a report from Reuters, the grocery store market in Chicago has become extremely competitive, with stores like Roundy Inc.’s (NYSE:RNDY) Mariano’s taking share on the luxury end (Mariano’s features piano players in its stores), and Aldi Inc. and Wal-Mart Stores (NYSE:WMT) drawing in customers with lower budgets.
Safeway CEO Robert Edwards said during a conference call with investors that Dominick’s has been a “noticeable drag” on Safeway’s financials and has continually been the worst performing of the company’s assets. According to Reuters, Safeway bought Dominick’s in 1998 for $1.2 billion. At that time, there were 118 Dominick’s stores in operation in the Chicago area, but now there are only 72.