retail news in context, analysis with attitude

The Wall Street Journal reports that some analysts are suggesting that Safeway should sell its Canadian operations, which is worth about $5.5 billion, and there is at least some suggestion that Loblaws and Metro in Canada could be positioning themselves for a Safeway Canada bid.

Much of the speculation seems to be fueled by a brokerage called BMO Capital Markets.

According to the story, "Metro, which runs a network of more than 600 food stores and 250 drug stores in Quebec and Ontario, said on Tuesday that it was selling part of its stake in Alimentation Couche-Tard Inc. The sale will raise about $479 million, the company said. Loblaw, meanwhile, announced late last year that it was launching an IPO for its real-estate holdings into a REIT. BMO said that plan could raise almost $700 million for Loblaw, Canada’s largest food retailer."

While some in the analyst class may believe that a sale of Safeway Canada is a good idea, there is no suggestion that they have any inside information that such a transaction is in the works.

Meanwhile, Safeway is going through its own changes - the impending (and, if some people are to believed, partially-forced) retirement of CEO Steve Burd, the search by the board to find a replacement because of the apparent lack of a succession plan, and the planned IPO of its Blackhawk gift card unit.
KC's View:
It would seem to be a time of choices at Safeway, where priorities could be set that will propel (or, I suppose, inhibit) its operations for some time to come.

In the case of a new CEO, will the board choose a financially oriented candidate, or a merchant? (I'm told the board is leaning in the direction of a CFO-type ... which certainly will influence its long-term strategic thinking.) Will they go outside the company, or choose an internal candidate? (It has been suggested to me that it is far more likely the board will pick someone from the inside.) How will it compensate for the loss of revenue that inevitably will happen when Blackhawk gets spun off? (Will selling the Canada business cover up some corporate deficiencies?)

The thing is, some folks I talk to within the business suggest that the ways in which the board may be leaving may be the wrong directions - that it should be seeking a real merchant from the outside, someone who can reinvigorate the stores and make them more competitive and differentiated.

And there is even some suggestion that while Delhaize's organizational changes have gotten more headlines lately, in fact Safeway needs to confront some systemic issues in the same way. It would mean some trauma in the short term, but no pain, no gain.

At least, that's what I'm hearing...