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Dominick's parent Safeway to exit Chicago market, some stores sold already

Safeway tells ABC7 a small group of Dominick's stores has been sold and it is working to identify buyers for the remainder.
October 10, 2013 8:32:16 PM PDT
Safeway Inc., which operates 1,406 stores in the U.S., says it's exiting the Chicago market by early 2014 to focus on more profitable business. It operates 72 Dominick's stores in Chicago that have been losing money. The move comes after Safeway said in June it would sell its Canadian stores.

Some of those picking up items on the way home Thursday evening throughout the region were shocked.

"That's awful, people are going to lose their jobs. People are going to lose their jobs, they provide a great service and great goods and it's gonna be awful," said Patrice Ball-Reed, Dominick's shopper.

"Come on, I just think they haven't done well enough against Jewel," said Rachelle McClarren.

Safeway tells ABC7 a small group of Dominick's stores has been sold to and it is working to identify buyers for the remainder of the operation. The company anticipates having plans in place for the remainder of the stores by early 2014.

Safeway said Thursday it had sold four of it's Dominick's stores to New Albertsons, Inc., which operates Jewel-Osco grocery stores. The four stores are:

  • 1340 S. Canal Street, Chicago, IL

  • 2550 N. Clybourn Avenue, Chicago, IL

  • 14200 S. Bell Road (at 143rd), Homer Glen, IL

  • 1340 Patriot Boulevard, Glenview, IL

Safeway said the stores will continue to operate under the Dominick's banner until Jewel-Osco can complete their conversion to Jewel-Osco stores. According to a Safeway press release, "Dominick's will be working with Jewel-Osco and the unions to ease the transition for store employees, and to facilitate continued employment for as many of them as possible."

The union, the United Food and Commercial Workers, says the company never understood what it took to build trust with Chicagoans after buying the 92-year-old grocer in 1998.

"They've got their bottom line on profits, not on people, not on the community and when you are up against someone like that it is really hard to make them understand that the way to successful is to meet the needs of the people in these communities," said Eric Bailey, UFCW Local 1546.

"Take one day at a time and find another job if I can. I still got a family to support," said Jorge Reyes, Dominick's employee.

"Dominick's has been underperforming, the whole company, for a long time. Sources say the overhead is quite high, prices are higher than some competitors," said Brigid Sweeney, Crain's Chicago Business.

"But my grocery bill is high, it's always a little pricier. But it seems worth it because it's cleaner," said Erica Luna, shopper.

Safeway said Thursday its third-quarter net income fell 58 percent, hurt by a software impairment charge, higher theft and lower property gains. Results beat expectations however and shares rose nearly 6 percent in aftermarket trading.

Safeway and other traditional supermarket chains have been working to focus operations and keep costs low to fight off competition from big-box discounters such as Target and Wal-Mart Stores, as well as drug stores and dollar stores that have been expanding their grocery sections.

"These actions will allow us to focus on improving and strengthening our core grocery business," said CEO Robert Edwards.

Safeway's net income fell to $85.8 million, or 27 cents per share. That compares with $157 million, or 66 cents per share, in the prior-year quarter. Excluding a software impairment charge, net income was 30 cents per share. Analysts expected net income of 16 cents per share, according to FactSet.

Revenue rose 1 percent to $8.62 billion. Analysts expected revenue of $8.52 billion. Revenue in stores open at least one year, a key retail metric, rose 0.8 percent including fuel and 1.9 percent excluding fuel sale.

Safeway expects to get a cash tax benefit of $400 million to $450 million for exiting the Chicago market. That will partly offset its cash tax expense related to selling its Canada stores in June.

Safeway also expects a multi-employer pension withdrawal liability which is generally paid over 20 years. The company expects to pay up to $375 million quarterly and the value of related tax benefits is up to $145 million.

For the year, the company now expects net income of 93 cents to $1, from a previous range of $1.02 to $1.12 per share. That excludes proceeds from selling its Canada business. Excluding the Dominick's business, the company expects net income of $1.05 to $1.12 per share. Analysts predict $1.09 per share.

Shares rose $1.84, or 5.8 percent, to $33.41 in aftermarket trading after closing up 77 cents at $31.57. The stock has traded between $15 and $32.72 over the past 52 weeks.

The Associated Press contributed to this report.

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