Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
http://www.fool.com/News/mft/2004/mft04021216.htm?ref=btp

Strikes Against Safeway

By Dave Marino-Nachison
February 12, 2004

Grocery chain operator Safeway (NYSE: SWY) handed out decent fourth-quarter and 2003 earnings numbers today. But the company's performance continues to be marked down by the effects of an ongoing strike that's hurting business in California and stands to reverberate throughout the U.S upon its resolution.

Safeway's quarterly profit, before special items, beat Street estimates. That, along with yesterday's news that labor talks have resumed after a lengthy stalemate, appears to be encouraging investors, who pushed the stock up a few percentage points on a down day for the market. (The four-month-old strike involves some 70,000 workers from Safeway and collective bargaining partners Albertson's (NYSE: ABS) and Kroger (NYSE: KR).)

But the numbers themselves aren't pretty. Yes, quarterly sales increased slightly year over year, but the company attributes most of that to new stores and an extra week in the period. Same-store sales fell even when excluding the effects of the strike. (Safeway provides a range of numbers detailing strike effects, creating the figures by comparing pre-strike internal estimates with actual reported numbers.) Some market estimates have the strike's total impact on grocery store sales passing into nine figures.

Considering the size of the California market, it seems likely that whatever the upshot of this strike may be there'll be ripple effects in other markets. (Check out W. D. Crotty's October Take on the story for more information.) Safeway, meanwhile, continues to take hit after hit. Its November decision not to sell its Dominick's chain resulted in a $391 million after-tax charge in the quarter. CFO Vasant Prabhu left at year's end to join Starwood Hotels & Resorts (NYSE: HOT).

And today, citing uncertainty in California, the company withdrew its earnings guidance for 2004. Safeway shares, however, are creeping back toward pre-strike levels. Investors, it seems, are confident that the strike will pass before long -- and are happily digesting media reports suggesting that the union's position is weakening.

Share news and thoughts on the grocery strike on our Safeway discussion board.

Dave Marino-Nachison is a Motley Fool contributor, and doesn't own any of the companies in this story. He can be reached via email: gofhcf@yahoo.com
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement