The Investment Column: Safeway takes its eye off the ball
Thursday 20 November 1997
Yesterday's profits warning from Safeway was a belter by any standards. Non-existent sales growth and a warning on full-year profits came on top of flat half-year profits and an interim dividend held for the first time since 1992. It is obvious who has lost out most to the resurgent Sainsbury's.
And we have a return to the normal received wisdom that not all of the big four supermarket operators can succeed at the same time.
Safeway's predicament is all the more surprising given the progress the group made with its Safeway 2000 initiative which set about restructuring the cost base and attracting family shoppers.
What appears to have happened is that while Safeway was achieving great marketing successes with its Harry and Molly advertising and whizzy in- store technology, it was taking its eyes off some of the nuts and bolts of retailing such as stock availability and the supply chain.
Meanwhile, the wooing of high-spending family shoppers seems to have deterred secondary customers.
The proposed three-point, three-year recovery plan is not all it appears either. The aim to increase sales by pounds 1bn in the next three years works out at just 4 per cent a year, which rivals are achieving anyway; the pounds 60m cost savings are not significantly more than previously announced and, of the pounds 600m promised to shareholders over three years, pounds 400m of that will be the normal dividend anyway.
That leaves shareholders panting for a paltry 10p per share which probably won't arrive until the third year.
With an Asda deal virtually ruled out on competition grounds and no obvious overseas bidder, it could be a long haul.
On full-year forecasts of around pounds 400m, the shares, down 64p to 330p yesterday, trade on a forward multiple of 13.
That is a deserved 26 per cent discount to the market and the shares look no more than a hold.
- 2 How the language you speak changes your view of the world
- 4 Italian police 'reveal' what Jesus looked like as a young boy
'Fire at every person you see': Israeli soldiers reveal they were ordered to shoot to kill in Gaza – even if the targets may have been civilians
Italian police 'reveal' what Jesus looked like as a young boy
Who should I vote for? The Independent quiz matches best political party for undecided voters ahead of the general election
First-time buyers in London 'need to earn at least £77,000'
General Election 2015: Photographic history of Bullingdon Club tracked down - including new picture of David Cameron in his finery
In defence of liberal democracy
Over 50,000 families shipped out of London boroughs in the past three years due to welfare cuts and soaring rents
EU asylum policy is 'a direct threat to our civilisation', says Nigel Farage
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
Schools forced to act as 'miniature welfare states' with teachers buying underwear and even haircuts for poor pupils
iJobs Money & Business
£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...
£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...
£215 per day: Ashdown Group: Junior Project Manager (website, web application ...
£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...