Safeway Supermaket Chain to Hang ‘For Sale’ Sign

by Burke Speaker | February 20, 2014 9:31 am

Safeway Supermarket (SWY[1]) is putting itself up for sale, the grocery company announced late Wednesday — a move that sent SWY stock up more than 4.5% in early trading today.

[2]Shares of the grocer are also rising in part due to fourth quarter earnings that beat what analysts were expecting.

Safeway’s announcement was that it is in formal talks with an unnamed company for the sale. An agreement has yet to be reached.

The company is not commenting on the sale details.

The announcement was welcomed in part by Wall Street but also by certain investors (via Forbes):[3]

News of the sale will come as a bit of a relief to activist investors like hedge fund Jana Partners, who in September took the 6.2% stake that prompted Safeway to enact a poison pill[4]. Jana said that Safeway could do more with its business, and suggested that a sale might be a good idea.

Considering the financial situation of the grocer, a sale could be just what the doctor ordered to inject new life into Safeway’s financial future. While its Q4 results were up, the situation has not improved much since last year.

Safeway reported $11.3 billion in fourth quarter revenue, a slight increase over the $11.2 billion reported for the prior-year period and coming in just under the $11.5 billion Street analysts were predicting. Fourth quarter net earnings came in at $100 million, or 35 cents per share, a decrease over the $170.7 million, or 71 cents per share, reported for the same quarter in 2012. Adjusted for special items, however — including a $57.4 million loss from foreign currency exchange — Safeway’s fourth quarter earnings per share came in at 53 cents per share, a drop from the 59 cents per share reported in the same quarter in 2012 but coming in above the 46 cents per share analysts were expecting.

In other words, note that this means Safeway’s 2013 revenue is $36.1 billion, exactly the same as reported last  year.

The company is looking to increase shareholder value — and new ownership may be just the ticket.

“We are pleased with the progress we made in 2013,” Robert Edwards, Safeway president and CEO, said in a statement. “Strategies to grow sales and improve operating profit dollars have begun to produce results. In 2013, we generated our best volume growth since 2006, and we had our best identical-store sales growth in the last five years.”

SWY stock is up 6% year to date.

Source URL: https://investorplace.com/2014/02/safeway-supermaket-chain-for-sale/

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