Safeway Exiting Chicago Market

In a retrenchment, Safeway Inc. has announced that it will exit the Chicago market, where it operates 72 Dominick’s stores, by early 2014. As part of that initiative, the company said it has sold four of its Dominick’s locations in the greater Chicago area to New Albertsons, Inc., which operates Jewel-Osco grocery stores.

The Chicago stores are on South Canal Street and North Clybourn Avenue. The two others are in Homer Glen and Glenview, IL. The company is marketing other Dominick’s assets, the company asserted.

Safeway noted that the company reached its decision to exit the Chicago market after the end of the third quarter of 2013. The company maintained that Dominick’s incurred losses before income taxes of $13.7 million in the third quarter and $35.2 million in the first 36 weeks of 2013. Safeway declared that it wanted to spend resources in markets away from Chicago where it has stronger businesses.

In June 2013, Safeway Inc. announced that it entered into an agreement to sell its Canadian operations to Stellarton, Nova Scotia-based supermarket chain Sobeys Inc. for C$5.8 billion in cash.

In a conference call, Robert Edwards, president and CEO, said Safeway would focus on core markets and use a tax loss from its Chicago exit to leverage tax liabilities resulting from the sale of the Canadian operation.

“The decision to sell Canada Safeway and to exit the Chicago market is consistent with Safeway’s priority of maximizing shareholder value,” he said. “These actions will allow us to focus on improving and strengthening our core grocery business. We are continuing to review all of our businesses to optimize our allocation of resources, improve sales and grow operating profits.”

In the third quarter, Safeway’s sales were $8.62 billion versus $8.53 billion in the year-prior period. Net income was $65.8 million, or 27 cents per diluted share, versus $157 million, or 66 cents per diluted share, in the 2012 period. Identical store sales gained 1.9% in the third quarter year over year.