Chicago has been a tough go for Safeway ever since it acquired Dominick's Finer Foods 15 years ago. Now, Safeway has decided it can no longer continue in the market and has announced it will sell its operations there.
In a conference call yesterday with analysts, Safeway CEO Robert Edwards said the sale of Dominick's "will eliminate a noticeable drag on our financial results and a significant drain on our resources, allowing us to focus on our remaining operations."
Safeway has indicated that several parties are interested in purchasing its Dominick's stores. The company announced yesterday that it has reached a deal to sell four units, two in Chicago and two in the suburbs, to Jewel-Osco.
Competition has increased significantly in the Chicagoland market since Safeway first acquired Dominick's. A whole host of competitors including Aldi, Jewel-Osco, Meijer, Roundy's, Target and Walmart have expanded in the area while Dominick's store count has gone from 116 to 72.
Rumors about a sale of Dominick's have been in the air for years. Back in 2005, in a story on RetailWire about a possible deal by Roundy's (run by former Dominick's boss Robert Mariano) to acquire the chain, I wrote, "The Dominick's purchase has been an unmitigated disaster and while it will require some pride swallowing to sell the business for $325 million (the purported offer price) after buying it for $1.8 billion, it has to be done. Safeway cannot fix Dominick's."
One hiccup with selling Dominick's in the past was the United Food and Commercial Workers (UFCW) union, which represents the chain's workers. It has been long rumored in the past that former Safeway CEO Steve Burd has had buyers interested in the chain — presumably under more favorable terms — but none could ever work out a deal with the UFCW.
Will the sale of Dominick's in Chicago and Safeway Canada result in a stronger or weaker overall Safeway going forward?