To improve tepid identical-store sales over the past few years, Safeway recently launched "just for u" to improve its existing Club Card loyalty program and enhanced its fuel reward programs. The initiatives, along with a more manageable food-inflation Read more
Safeway recently launched a "just for u" initiative to improve its existing Club Card loyalty program, which should reignite market share.
The significant capital invested in the Lifestyle upgrades gives Safeway one of the freshest store bases in the industry, which should help to recapture consumers lost during the recession to low-price operators.
Now that the Lifestyle remodel program is complete, there should be less capital spending. At roughly five years of age, the store portfolio should be nearing peak EBITDA margins, resulting in higher free cash flow. Read more
Safeway lacks a relevant pricing strategy, since it lost customer traffic to low-cost operators during the recession but has yet to gain traction with the higher-end type of consumers like at Whole Foods, where comparable sales have bounced back strongly in the recovery.
Returns on capital have been in steady decline and should continue to be since the Lifestyle remodel investment failed to provide enough of a sustained revenue lift to generate the required rate of return for the amount of capital invested.
Investors are not properly factoring the competitive risk for Wal-Mart's small-store expansion, which encroaches upon traditional supermarket trade areas. Read more
Safeway has a stable senior management team with a strong track record of returning nearly all of its net income to shareholders through dividends as well as share repurchases. Steven A. Burd has been CEO since 1993 and chairman since 1998 but has announced Read more