Robert Edwards has made his mark quickly as the new chief executive officer of Safeway with the pending sale of the chain’s Canadian assets — announced less than a month after his promotion to succeed Steve Burd.
Safeway, based in Pleasanton, Calif., said in mid-June it plans to sell its 223 stores and 12 manufacturing facilities in Canada to Sobeys for $5.7 billion (U.S.) — a deal that would seem to imply a more shareholder-friendly approach to corporate governance, observers noted.
Andrew Wolf, managing director of the Boston office of BB&T Capital Markets, said the apparent change in corporate governance emanates from Edwards and T. Gary Rogers, the company’s new chairman of the board.
"There’s clearly been a shift in thinking that seems to suggest a very shareholder-friendly approach," Wolf explained. "The Canadian transaction really boosts the value of Safeway, and it may mean Safeway will consider divesting some of its weaker divisions — in Texas, the Midwest and the East — to re-trench and right-size the business and focus on the West, where it is strongest."
He said the company has indicated it is not interested in acquisitions.
According to Edwards, "The substantial cash proceeds [from the sale of Canada] will allow us to create value for all Safeway shareholders."
Edwards said Safeway is likely to use most of the proceeds from the sale to pay down $2 billion in notes due in August 2014 and the majority of what remains to buy back stock. He also said some of the proceeds may be used to invest in growth opportunities — primarily internal initiatives the company has been working on to grow operating income in the core grocery business.
Once the deal is completed — by the fourth quarter, the company said — Safeway will operate 1,415 supermarkets in the U.S. with sales of approximately $37.5 billion.
In addition to the Canada sale, Edwards is also presiding over several major internal initiatives at Safeway, including the testing of a new loyalty program that links to shoppers’ checking accounts for a one-card payment program.
The Fast Forward initiative, which is being tested in the Sacramento, Calif., market, could eventually be rolled out to other Safeway markets, the company said.
"At Safeway, we’re always looking for innovation and best practices," Edwards was quoted as saying at the company’s annual shareholders’ meeting in May, when he officially took the helm of the company he had joined as chief financial officer in 2004.
In addition, Safeway is rolling out tests of reconfigured Center Store layouts that seek to improve product adjacencies with the perimeter/service departments, and is also remerchandising about 300 stores to better serve a more upscale demographic.
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