In one of the largest single retrenchments of a supermarket group in recent times, Safeway, part of the Argyll group, announced yesterday that it was closing 17 of its 383 stores, threatening up to 1,250 jobs.
The company said the closures were part of a review of the whole business and were a consequence of "a changing retail scene". The 17 stores, all of which are some of the group's smallest and oldest, were no longer considered viable. Many are making a loss.
The stores will be put up for sale and the locations could be of interest to some of the "hard" discounting groups such as Aldi, Lidl and Netto which have been expanding aggressively in the UK in recent years.
One City analyst said: "Times are tough and we are talking about 250,000 square feet of space being taken out of the market here. Safeway's problem is that it didn't fine-tune its portfolio in the late 1980s in the same way as Sainsbury or Tesco." Tesco closed 140,000 square feet last year as part of a constant store updating programme.
Argyll said the closures were part of its Safeway 2000 programme, which has concentrated on improving service and increasing the number of own- label products.
Andrew Fowler, food retail analyst at broker UBS, said: "There's no way these stores have suddenly become unprofitable. If they have, why haven't they got rid of them before? I think it's an attempt to clear the decks . There were always going to be some exceptional items in this year's results and now they can just add these to them."
Argyll said it was "inappropriate" to discuss possible job losses as the group hoped to redeploy some staff and offer others early retirement.
Safeway has also been creating jobs at its new superstores, such as the three in north London which opened in February. These stores, which are aimed at the well-heeled family shopper, have creches, dry cleaners and photographic film processing labs.
Some of the older Safeway stores have been put under pressure by new openings. One in Ferndown, Dorset, has seen a new, larger Safeway open three miles down the road, together with a new Sainsbury's and a Tesco.
Argyll has been struggling to keep up with its two largest rivals, Sainsbury and Tesco, both of which expanded at break-neck speed during the retail boom of the late 1980s. In December the company's interim figures showed that like-for-like sales at Safeway fell by 0.3 per cent on the previous year, the first fall since Argyll acquired the chain in 1987.
In February the group announced pressure on margins and a 4 per cent rise in underlying sales compared with Sainsbury's 5.5 per cent and Tesco's 7 per cent.
Argyll's shares closed 1.5p higher at 290.5p.Reuse content