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
News
In 2006, Pluto was reclassified as a 'dwarf planet'
scienceBut will it be reinstated?
News
Jennifer Lawrence at the Vanity Fair Academy Awards party in February 2014
people12 undisclosed female victims are seeking $100m in damages
Arts and Entertainment
Adam Levine plays a butcher who obsessively stalks a woman in Maroon 5's 'Animals' music video
music'Animals' video 'promotes sexual violence against women'
News
people Biographer says cinema’s enduring sex symbol led a secret troubled life
PROMOTED VIDEO
Voices
voicesI like surprises - that's why I'm bringing them back to politics, writes Nigel Farage
News
Bear and hare woodland scene from John Lewis Christmas advert
newsRetailer breaks with tradition, selling real festive fir trees online for the first time
Arts and Entertainment
Anthony Horowitz will write the next 007 novel
booksAnthony Horowitz to write new instalment in spy series for 2015
News
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
people
News
people

Kirstie Allsopp has waded into the female fertility debate again

Sport
Kicking on: Nathaniel Clyne is relishing the challenge of the Premier League after moving from Crystal Palace
footballSurprises include a first ever call-up for one Southampton star
News
ebooksAn unforgettable anthology of contemporary reportage
Voices
4 May 2013: The sun rises over Tower Bridge in London. Temperatures across the UK could be higher than several European holiday destinations by Monday, including parts of Italy and France (Andy Hepburn/PA)
voices
News
The moon observed in visible light, topography and the GRAIL gravity gradients
science

...and it wasn't caused by an asteroid crash, as first thought

News
Researchers say a diet of fatty foods could impede smell abilities
scienceMeasuring the sense may predict a person's lifespan
News
newsGlobal index has ranked the quality of life for OAPs - but the UK didn't even make it into the top 10
Extras
indybest
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

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Italian couples fake UK divorce scam on an ‘industrial scale’

Welcome to Maidenhead, the divorce capital of... Italy

A look at the the legal tourists who exploited our liberal dissolution rules
Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

The vintage series has often been criticised for racial stereotyping
An app for the amorous: Could Good2Go end disputes about sexual consent - without being a passion-killer?

An app for the amorous

Could Good2Go end disputes about sexual consent - without being a passion-killer?
Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

Llansanffraid is now Llansantffraid

Welsh town changes its name, but can you spot the difference?
Charlotte Riley: At the peak of her powers

Charlotte Riley: At the peak of her powers

After a few early missteps with Chekhov, her acting career has taken her to Hollywood. Next up is a role in the BBC’s gangster drama ‘Peaky Blinders’
She's having a laugh: Britain's female comedians have never had it so good

She's having a laugh

Britain's female comedians have never had it so good, says stand-up Natalie Haynes
Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

Let there be light

Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
Great British Bake Off, semi-final, review: Richard remains the baker to beat

Tensions rise in Bake Off's pastry week

Richard remains the baker to beat as Chetna begins to flake
Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

A look to the future

It's time travel fashion at Louis Vuitton in Paris
The 10 best bedspreads

The 10 best bedspreads

Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
Arsenal vs Galatasaray: Five things we learnt from the Emirates

Arsenal vs Galatasaray

Five things we learnt from the Gunners' Champions League victory at the Emirates
Stuart Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

This deal gives England a head-start to prepare for 2019 World Cup, says Chris Hewett
Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?