NEW YORK -- Safeway won't be among suitors of Albertsons, which put itself up for sale Sept. 2, Steve Burd said (see SN Albertsons story, Page 1).
Safeway's chairman and chief executive said going into new markets would detract the No. 3 supermarket chain from its long-range plan to grow earnings though its store conversion and accompanying brand-building effort.
"My feeling about acquisitions hasn't changed," Burd said, speaking during the Q&A portion of a presentation last week at the Goldman Sachs' Global Retailing Conference here. "We think we're out of the major acquisition game for three years. Does it mean we wouldn't do a fill-in deal? We'll explore those opportunities, and we have."
Asked after the Q&A if stiffened competition led to the No. 2 retailer's decision to seek a buyer, Burd said that while efforts by retailers to build share in various markets could fuel that impression, competition hasn't gotten fiercer.
Burd also was asked to defend higher-than-anticipated costs associated with the conversions of stores to its upscale and perishable-focused "lifestyle" format. Pleasonton, Calif.-based Safeway expected to have 25%, or 460 of its stores, converted by year's end.
He pointed out that sales from the remodels also have been higher than expected, the stores should be accretive to earnings after three years, and Safeway is driving down labor and other costs. Sales at lifestyle stores converted in 2005 should offset the expense of the next batch of lifestyle stores next year, and the year after, financial results should improve still further, he said.
"The investment has more sales legs than what I've heard people complain about with their remodel programs," he said.
Safeway could see a sales benefit if a lot of Albertsons stores exit its markets, Burd said. But he emphasized that the retailer's plan won't be altered by marketplace changes like the sale of Albertsons or presence of Wal-Mart supercenters, which he said compete with 24% of his stores.
"We have a strategy we're pursuing. It's very different from all the others in our sector," he said. "We have our game plan. We've thought about it long and hard. We've done the consumer research."
Burd also fielded questions about the impact of Hurricane Katrina. He said that while gas prices driven higher by hurricane damage have raised Safeway's distribution costs, and will likely stay high for a while, Safeway is less vulnerable than other retailers, especially those that sell general merchandise that are discretionary purchases. "We're not seeing any drop in demand for our business," he told SN.
As for food products, it's too soon to tell if suppliers would charge retailers higher prices, he said, adding, "I don't think anyone's going to take advantage of the situation."
On the subject of new union leadership in the United States and Canada, Burd said he doesn't expect labor to have much success in organizing non-union retailers like Wal-Mart.
"The track record in retail is not strong for that," he said in response to a question. "We don't expect a lot in that area. We think we'll be fine, regardless of how that plays out."