Safeway 3Q Profit Falls on Charges From Restructuring
Pleasanton, Calif., Safeway Inc. reported Tuesday that profit fell in the third quarter, due mostly to a charge linked to a restructuring of its Texas operations.
Quarterly profit slipped to $122.5 million, or 27? a share, compared to $159.2 million, or 35? a share, last year. Sales increased 7.3% to $8.95 billion from last year’s $8.34 billion. Increased fuel sales, marketing initiatives and the chain’s Lifestyle store execution were credited with driving the sales increase.
“We are pleased with the progress we made this quarter on several fronts,” said Steve Burd, chairman, president and CEO, Safeway. He noted that the company initiated the restructuring of its Texas operations, made “significant progress” in dealing with labor unions in Chicago and completed an employee buyout in the San Francisco Bay area.
In Texas, Safeway plans to close 26 underperforming stores and remodel its remaining locations into the “Lifestyle” format.
The chain made note of rising fuel and energy costs in its earnings release. Although Safeway avoided a portion of this increase with the use of fixed-price natural-gas and electricity contrasts, the net impact of higher fuel and natural-gas prices increased store-utility costs, store-supply costs and distribution costs. It also lowered operating profits from fuel stations. Safeway estimates that higher energy costs reduced net income by approximately $23 million in the third quarter of 2005.
Kroger, Virginia Union Reach Agreement
Cincinnati, The Kroger Co. has reached a tentative agreement with the union representing about 3,500 Kroger associates at 47 stores in Virginia, West Virginia and Tennessee.
Details have not yet been released.
Goody’s And ShopKo Get New Bids
New York City, The acquisition process surrounding Goody’s Family Clothing and ShopKo Stores became much more complicated. Goody’s Family Clothing Inc. received takeover bid number two, this one from an undisclosed buyer offering to purchase the clothing retailer for $8.85 per share. The 369-store chain had agreed in principal to be acquired by a previous bid from Sun Capital Partners for a lower price. The latest offer is net of the termination fee and expenses for the earlier takeover agreement, and may be raised after the completion of due diligence, according to Goody’s.
ShopKo is asking its two bidders to make a “best and final” offer. Sun Capital Partners and Goldner Hawn Johnson & Morrison are engaged in a bidding war for the Green Bay, Wis.-based chain. Sun Capital offered its $806 million bid, prompting an $822 million bid from Goldner Hawn Johnson & Morrison.