OPERATIONS

Burd resigns as Safeway chairman, CEO

BY Mike Troy

New York — The hunt is on for a new chief executive at Safeway following the resignation of longtime chairman and CEO Steve Burd.

Burd, 62, is scheduled to retire at the company’s annual stockholders meeting on May 14 and will aid in the search of his successor that is said to include internal and external candidates. Burd joined Safeway in October 1992 as president and was appointed CEO in May of the following year.

"I feel this is the right time to move forward with a transition plan," Burd said. "The company is gaining market share with each passing quarter. We have developed the most sophisticated digital marketing platform in retail, we are implementing the most comprehensive and personalized fuel loyalty program, and we will be rolling out a wellness initiative that has the potential to transform the company."

Burd said he wanted more personal time to further pursue his interest in health care.

According to Safeway, under Burd’s leadership the company has become one of the nation’s most recognized leaders in health care. In the last eight years, Safeway has introduced innovative design and practice features into its health plans that helped control cost. As a result, while the average U.S. company experienced an 8% annual growth in employer health care costs from 2005 through 2011, Safeway averaged a 2% annual growth rate for both the employer and employee contributions, according to the company.

While Safeway understandably sang Burd’s praises in announcing his departure, whoever fills his shoes faces an uphill battle. Safeway is a heavily unionized, traditional supermarket retailer with a moderately declining store base that numbers 1,644 units. Its markets share is under assault from all manner of unconventional retailers. Marginally profitable and with long term debt of $6.4 billion, Safeway faces a long list of challenges to improve the profitability of its $43.6 billion operation and reward shareholders who have suffered of late.

The company noted that Burd’s arrival at Safeway coincided with extraordinary growth in new food retail formats, virtually all of which were non-union. Even though these factors put downward pressure on both sales and margins, the combination of strategic initiatives and cost reduction efforts enabled Safeway to outperform the S&P 500 over the last 20 years. However, much of that performance came during the first half of Burd’s career as Safeway’s stock occasionally traded above $60 for a several year period beginning in the late 90s. It’s been all downhill ever since with shares unable to break above $20 since last summer.

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FINANCE

Gap acquires Intermix for $130 million

BY Katherine Boccaccio

San Francisco — In a development that will take it into the growing global luxury market, Gap Inc. announced Thursday it has acquired women’s apparel retailer Intermix Holdco for approximately $130 million in cash. The transaction was completed Dec. 31.

Intermix, which operates 32 stores and an e-commerce site, offers a mix of luxury brands including merchandise from up-and-coming designers. The featured brands range from Rag & Bone and Stella McCartney to Proenza Schouler and Helmut Lang. Gap said it sees opportunity to expand the chain and lift the website’s visibility.

“Intermix has a distinctive position in this growing market with clear competitive advantage,” said Glenn Murphy, chairman and CEO of Gap Inc. “Their record of merchandising with a keen eye towards mixing multiple designer labels, complemented with exclusive product, is appealing to their loyal customers.”

According to Gap, Intermix’s senior team, including co-founder and CEO Khajak Keledjian and president Adrienne Lazarus, will continue to operate the business from New York, with Keledjian as chief creative officer. They will report to Art Peck, president of Gap Inc.’s Growth, Innovation & Digital division.

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FINANCE

Macy’s and Nordstrom top estimates in December; Kohl’s misses

BY Katherine Boccaccio

New York — As cash-strapped consumers curtailed holiday spending, department store retailers felt the pinch and some performed better than others in an uncertain environment. The strongest performances were turned in by Macy’s and Nordstrom, both topping estimates.

Overall, analysts looked for 3.3% same-store sales growth for December across 17 chains, down from 4.2% growth in December 2011, according to Thomson Reuters.

Macy’s reported a rise in December same-store sales of 4.1%, edging Wall Street’s expected 4% rise, and a total monthly sales gain of 3.6% to $5.102 billion. But the department store heavy-hitter cuts its guidance for the fourth quarter and detailed a series of “normal-course adjustments” to its store portfolio that include closing six underperforming stores. The chain will open nine other Macy’s and Bloomingdale’s around the country to rebuild its total store count.

CEO Terry Lundgren said the rate of comp growth was less than the retailer expected, but that was due partly to uncertain economic news and the lingering effects of Superstorm Sandy.

“Last month was our fourth consecutive December with same-store sales growth, which is indicative of the sustainability of our key business strategies,” said Lundgren. “While the rate of growth was somewhat less than we had expected in the first two months of the fourth quarter, it came amid some significant headwinds from uncertain economic news and the lingering effects of Hurricane Sandy.”

Kohl’s Corp. saw same-store sales rise 3.4% in December, along with a total sales increase of 4%, falling below company expectations. “December sales were lower than planned,” said CEO Kevin Mansell. “Additionally, sales came late in the holiday shopping season and, as a result, were at deeper discounts than planned. We are taking the necessary markdowns in the fourth quarter to manage our inventory as we transition into the spring season.”

Among other department stores reporting:

• Nordstrom recorded an 8.6% rise in December same-store sales, beating the 3.6% estimate; and
• Bon-Ton Stores grew 2.4%.

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