PLEASANTON, Calif. -- Safeway here is expected to move quickly -- possibly later this week -- to begin cutting overhead costs and improving productivity once its merger with Dominick's Supermarkets, Northlake, Ill., is completed.
Changes were already apparent last week, when Safeway said Robert A. Mariano, 48, will resign as president and chief executive officer of Dominick's once the deal is completed, to be succeeded by Tim Hakin, 34, who will carry the title of president of Safeway's Dominick's division.
Mariano, a 26-year Dominick's employee, had said when the merger was disclosed a month ago that he would remain with the company. "His decision to leave sooner dramatically indicates the crisp pace of change Safeway will initiate," one observer told SN. Mariano could not be reached for comment last week. Mariano joined Dominick's in 1972 and moved up through the ranks while the chain was privately held; he became president and chief operating officer when Yucaipa Cos., Los Angeles, acquired the chain in March 1995 and added the title of chief executive officer a year later. Hakin has been with Safeway for 15 years, working in retail positions in the chain's northern California and Denver divisions. He is currently vice president for corporate retail operations, where he works with the company's senior management team on all aspects of operations and administration. Safeway's tender offer for Dominick's stock is scheduled to close at midnight tonight, and the deal will be consummated shortly thereafter, officials at Yucaipa told SN last week. Safeway officials declined to be specific on the timing. Industry observers told SN they expect Safeway to begin implementing changes at Dominick's almost immediately to improve the 112-store chain's operating performance. "Safeway didn't let any grass grow under it when it took control of Vons almost two years ago," Jonathan Ziegler, a San Francisco-based securities analyst with Salomon Bros., New York, said, "and it is likely to move just as quickly at Dominick's." Among other moves, Ziegler said, Safeway will introduce its "culture of thrift" at Dominick's to take costs out of the system at all levels, enhance private-label merchandising programs and integrate systems. Gary Giblen, managing director of FAC Equities, New York, said Safeway is likely to begin reducing overhead costs by handing out pink slips to eliminate administrative positions the same day it takes over the company. "And it will begin examining and re-engineering the way work is done to be most cost-effective," he said. Giblen also said he expects Safeway to deal with warehouse productivity issues that were already on Dominick's agenda. Chuck Cerankosky, an analyst with McDonald & Co., Cleveland, said Safeway is likely "to help the company move more rapidly into a growth mode by strengthening its real-estate program to make things happen faster." One of Hakin's first tasks at Dominick's, the company said last week, will be to help the two organizations identify and exchange best practices. In an unrelated development last week, Safeway said it has filed a shelf registration statement with the Securities and Exchange Commission for 20 million shares of common stock owned by three separate affiliates of Kohlberg Kravis Roberts & Co., New York-based investors. Safeway said none of the shares in the proposed offering are owned by the company. If all the shares in the registration are sold, the company said, KKR and its various partnerships would own approximately 13.2% of Safeway's common stock, down from approximately 17% prior to the offering.