Safeway's dividend cut lays ground for price war

SAFEWAY, BRITAIN'S fourth largest supermarket group, announced a 40 per cent cut in its dividend yesterday as its new chief executive seeks to rebase the business to fight the price war against Tesco and Asda.

Reporting a 20 per cent fall in first half profits to pounds 150m, Carlos Criado- Perez, who replaced Colin Smith this month, pledged to grow sales and profits by next summer. He also unveiled a host of measures designed to get Safeway back on track.

"In many ways we are going back to basics," said the Argentinian, who joined Safeway from Wal-Mart. "There is no rocket science behind what we are going to do. We are going to drive sales forward by increasing customer numbers and delivering retail with passion."

Mr Criado-Perez said Safeway would end its popular Harry and Molly television advertisements as part of a plan to stop all national advertising and concentrate on local promotions instead.

It is cutting the price of its top 1,000 items in an attempt to end the perception that Safeway is more expensive than rivals. Its national pricing policy will be replaced by one which will see each store match prices offered by local rivals. This will include the Wal-Mart-backed Asda, Mr Criado-Perez said. Where Safeway has dominant positions, such as in Scotland, it will charge higher prices.

Improvements will also be made to stock availability and the presentation of merchandise. "Somewhere in the transition from outdoor local markets to supermarkets something got lost," he said. "We have to make the shopping environment stimulating and fun."

Store managers have been given more autonomy and new computers will enable each store manager to assess their own profit and loss account.

Analysts said the new chief executive's plans were plausible but that the jury was out on his chances of success. "He is rouging up the trading format a bit to drive sales. He is a fresh voice from outside and so must have a chance."

Another said: "It is hard to see much downside in the shares from here but you still have to say that Safeway's assets are likely to end up in the hands of someone else."

Safeway said it was outperforming the market with like-for-like sales in its second quarter up by 2.4 per cent on the previous year. Current trading was in line with that figure. Its market share rose by 0.2 percentage points to 9.5 per cent though the gross margin was nearly 1 per cent lower due to price cuts.

Group sales in the six months to 16 October were 2 per cent higher at pounds 4.3bn. The dividend was cut by 40 per cent to 2.64p per share. The final pay-out will be cut by a similar amount, the company said.

Safeway said it was interested in buying some of the larger Somerfield stores which have been put up for sale but declined to say how many.

The company also wants to improve Safeway's sales per square foot, which stand at around pounds 15 compared to over pounds 20 enjoyed by the leading players. "Our stores are really empty. I'm sorry to be blunt but it's true," Mr Criado-Perez said.

The shares rose 11p to 179.5p.

Outlook, page 23

Suggested Topics
Arts and Entertainment
books
News
Dr Alice Roberts in front of a
people
Voices
Nigel Farage arrives for a hustings event at The Oddfellows Hall in Ramsgate on Tuesday
voicesA defection that shows who has the most to fear from the rise of Ukip
Arts and Entertainment
The Doctor and the Dalek meet
tvReview: Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
PROMOTED VIDEO
Sport
Diego Costa
footballEverton 3 Chelsea 6: Diego Costa double has manager purring
Arts and Entertainment
The 'three chords and the truth gal' performing at the Cornbury Music Festival, Oxford, earlier this summer
music... so how did she become country music's hottest new star?
Life and Style
The spy mistress-general: A lecturer in nutritional therapy in her modern life, Heather Rosa favours a Byzantine look topped off with a squid and a schooner
fashionEurope's biggest steampunk convention heads to Lincoln
Voices
Caustic she may be, but Joan Rivers is a feminist hero, whether she likes it or not
voicesShe's an inspiration, whether she likes it or not, says Ellen E Jones
News
i100
Arts and Entertainment
Star turns: Montacute House
tv
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Arts and Entertainment
Unsettling perspective: Iraq gave Turner a subject and a voice (stock photo)
booksBrian Turner's new book goes back to the bloody battles he fought in Iraq
News
i100
Arts and Entertainment
Some of the key words and phrases to remember
booksA user's guide to weasel words
Life and Style
Brave step: A live collection from Alexander McQueen whose internet show crashed because of high demand
fashionAs the collections start, Alexander Fury finds video and the internet are proving more attractive
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Day In a Page

The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

Kacey Musgraves: Nashville's hottest new star

The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

Soldier-poet Brian Turner on his new memoir

James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

Villa were not surprised that Vlaar was a World Cup star

Andi Weimann reveals just how good his Dutch teammate really is
Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

Bill Granger's simple Italian salads

Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
The Last Word: Tumbleweed through deserted stands and suites at Wembley

The Last Word: Tumbleweed through deserted stands and suites at Wembley

If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution