PLEASANTON, Calif. — Safeway on Tuesday sought to clarify its pension liabilities after an analyst on Monday cited its underfunded obligations in a report downgrading the retailer’s stock.
Safeway said its multiemployer pension contributions “continue to be a manageable issue, are being handled well by all parties involved in collective bargaining and will continue to be an important part of future negotiations.” Safeway said it had shared information on the pension liabilities with debt rating agencies since 2006 and are incorporated in the company’s ongoing debt ratings.
Safeway said its current liabilities total around $1.88 billion on a pre-tax basis. Credit Suisse analyst Edward Kelly in a report Monday said his firm estimated its liabilities to be $7 billion pre-tax, explaining that his figures were based on current fair value “and not smoothed actuarial values.”
Kelly noted that while its unlikely Safeway would be responsible for the entire underfunding, “the current fair value picture of the underfunding is troubling.” He downgraded the stock to “Neutral” from “Outperform” and his price target to $20 from $26.
Safeway however said the underfunding amount “has declined steadily since the steep drop in asset values in late 2008, due to improved market returns, contribution increases and benefit reductions. The underfunded liability is expected to be further reduced over time through collective bargaining, increased market returns or other actions taken by plan trustees.”
Safeway stock Tuesday regained around 0.67% of its 3.4% drop following the Credit Suisse report Monday.