Safeway to exit Chicago market

Date : 11 October 2013

Safeway has announced plans to leave the Chicago area market by early 2014, where it operates 72 stores under the Dominick’s banner.

Four sites divested to New Albertsons Inc

Safeway entered the Chicago market with the acquisition of Dominick’s in 1998. However, since that time the retailer has scaled back its operations from 166 stores to 72 today. Having already started to market its stores, four are initially to be acquired by New Albertsons Inc which operates the Jewel-Osco chain in the city, Safeway reported that there has been strong interest in its sites.

Exit will enable stronger strategic focus on west coast

The decision to exit Chicago was made as a result of a strategic assessment that was undertaken after Robert Edwards' recent appointment as CEO. The objective of this was to improve how it allocates resources, enhances its growth strategy and delivers shareholder value.

Chicago is an intensively competitive market. Locally based Meijer is a formidable competitor, along with Aldi which has also built a strong presence in the wider area. Over recent years, Walmart has adopted a multi-format approach to the city, opening Supercenters, Neighborhood Markets and Walmart Express stores. The exit will enable Safeway to focus its efforts on the more profitable west coast. Earlier this year the retailer announced the sale of its operations in Canada to Sobeys.

Sales and profit performance reflect price investments

Safeway has also reported that its sales for the third quarter increased by 1.1% to $8.6bn, with identical store sales up 1.9%. Net income over the period fell from $157.0m in 2012 to $65.8m, reflecting higher waste expenses and investment in pricing. A new strategy has recently been implemented that focuses on improving sales with less emphasis on controlling waste. The retailer has also been pushing forward with its centre store premium and Hispanic clustering initiatives, with identical store sales increases significantly above the company average.