Updated Research Report on Safeway - Analyst Blog
April 15 2014 - 7:16PM
Zacks
On April 15, 2014, we issued an updated research report on
Safeway Inc. (SWY) following the company’s mixed
results for fourth-quarter fiscal 2013 and its announcement that it
will merge with Cerberus Capital Management LP’s Albertsons for a
deal valued at approximately $9.0 billion.
The last fiscal remained quite eventful for Safeway. The company
was in news several times due to the Blackhawk IPO, its exit from
the Canadian market, the decisions to sell off its Dominic stores
and to exit the Chicago market by fiscal 2014, along with its plan
to voluntarily recall many of its products.
Amid a challenging macroeconomic environment, plagued by
uncertainties related to unemployment rates, energy prices,
difficulties in the banking and financial services sectors, and
dwindling consumer confidence leading to reduced consumer spending,
Safeway continued to experience poor identical stores (ID) sales.
Moreover, the sluggish non-fuel ID sales growth guidance for 2014
failed to deliver any positive indication about an improvement in
the economy.
Given such a difficult scenario, Safeway announced that it will
merge with Albertsons for $9.0 billion. The company also revealed
two other strategic initiatives – the distribution of the remaining
37.8 million shares of Blackhawk Network to its shareholders and
the monetization of its 49% stake in Casa Ley.
Safeway expects to fight back with the merger deal. After the
closure of the agreement, a diversified network will be formed by
Albertsons-Safeway with more than 2,400 stores, 27 distribution
facilities, 20 manufacturing plants and 250,000 employees.
Safeway is looking forward to this possible sellout/merger which
it expects will improve the merged entity's position in the
competitive niche. The combined company should be able to offer
more competitive prices and better customer service in a fiercely
competitive and dynamic retail market.
Safeway currently carries a Zacks Rank #4 (Sell). While the
upside potential of the stock is limited, stocks worth considering
in the retail/supermarket sector are Spartan Stores
Inc. (SPTN), The Kroger Co. (KR) and
Marks & Spencer Group plc (MAKSY). While SPTN
sports a Zacks Rank #1 (Strong Buy), KR and MAKSY hold a Zacks Rank
#2 (Buy).
KROGER CO (KR): Free Stock Analysis Report
MARKS&SPENCER (MAKSY): Get Free Report
SPARTAN STORES (SPTN): Free Stock Analysis Report
SAFEWAY INC (SWY): Free Stock Analysis Report
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