) recently announced that its Chief Executive Officer (CEO) and
Chairman Steve Burd will retire from his office on May 14, 2013,
after leading the company for almost 20 years. However,
post-retirement, he would assist the incumbent to facilitate
smooth transition in top management change.
During his tenure, Steve Burd held a key role in shaping
Safeway's strategic and operational plans. Over the years, he had
successfully steered the company towards growth as it
consistently outperformed the S&P 500 index through strategic
initiatives and cost reduction efforts. Some of his notable
initiatives include the establishment of a culture of thrift and
capital discipline, the 'Lifestyle' store format, the
well-regarded customer service program, and creation of a leading
prepaid payment network which is currently one of the largest
distributors of gift cards worldwide.
While Safeway made significant achievements under the
leadership of Steve Burd, the company has been witnessing
sluggish revenue growth over the past few quarters due to the
impact of economic uncertainty on the company's lifestyle
strategy. Despite top-line challenges, Safeway continues to
capture market share with its value-added offerings, which are
expected to enhance brand equity and reduce the company's
dependency on price.
Safeway has also been trying to improve its earnings on the
back of continuous share buyback program. We believe this is not
sustainable for the long term if sales remain sluggish. Also
worth mentioning in this context is our concern regarding the
highly leveraged balance sheet of Safeway.
Despite the milestones achieved in the last 20 years, certain
issues are yet to be resolved. As a result, the new CEO is likely
to have a daunting task ahead.
We currently have a long-term 'Neutral' recommendation on the
stock. Safeway carries a Zacks #3 Rank which translates into a
short-term Hold rating. The company confronts a wide spectrum of
competitive threats from several players among which
The Kroger Co.
), which carries a Zacks #2 Rank (Buy).
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SAFEWAY INC (SWY): Free Stock Analysis Report
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