Safeway pulls out of Chicago market
A customer leaves a Safeway store in San Rafael, Calif.
After a lousy earnings report, Safeway announced Thursday that it would dump its 72 Dominick's stores in and around Chicago. The news made investors happy. The company's customers and employees, not so much.
Joan Belford got the news from a reporter -- me -- in the produce aisle at a Dominick’s on the Near North Side.
"I’m shocked," she said. "This is my grocery store. What’s going to be here? And all these people -- where are they going to work?"
Some of them may end up working in the same place. Safeway has already sold four Dominick's locations to its rival Jewel, andthe company looking to line up buyers for other stores.
One could be Bob Mariano, who ran Dominick’s in the 1990s. In the last three years, he has opened more than a dozen upscale grocery stores, with lots of prepared foods and beautifully arrayed produce.
Safeway didn’t keep up with the times, says Phil Lempert, the editor of Supermarket Guru.
"You can’t just buy a great chain and ignore it. You’ve gotta keep evolving it. If you look at Mariano’s in Chicago, that’s really the direction Dominick’s should’ve taken."
Instead, after buying the chain in 1998, Safeway kept Dominick's stores run-of-the-mill -- and lost money.
Beyond Chicago, Safeway is fighting bigger trends. Andrew Wolf, who watches the food industries for BB&T Capital Markets, says pulling back is a smart move in a tough business. He says Safeway is getting squeezed by big discouters like dollar stores, Target, Costco -- and the biggest of them all Walmart.
"It’s not overblown to call it a blitzkrieg from Walmart over the last 20 years," he says.
Groceries aren’t growing that fast," he says. "So if Walmart’s going from nothing to 20 percent, a lot of folks are feeling a lot of pain."
Including one very disappointed lady in the produce aisle at Dominick's.