US supermarket firm Safeway may have to lower the price of its Dominick’s Finer Foods chain as its struggles to find a buyer for the Chicago-based unit.
Safeway has been trying to sell loss-making Dominick’s since November following increases in labour costs and fierce competition.
In its most recent earnings report, Safeway cut its valuation of the 113-store chain by US$302.7m to around $400m.
“All of this means that Safeway is probably going to have to sell it at a bargain basement price,” Burt Flickinger III, managing partner at Strategic Resource Group, a retailer consultant, was quoted by Dow Jones News Service as saying.
Recent media speculation regarding the sale has centred on Ron Burkle, whose investment firm Yucaipa originally sold Dominick’s to Safeway. Safeway bought Dominick’s over four years ago for a price of $1.2bn in cash and stock and the assumption of around $650m of debt. A spokesman for the investment company declined to comment, while a spokesman for Safeway said the retailer would make an announcement when it had something to announce.
A potential buyer for Dominick’s would not only have the problem of winning back market share, but would also be faced with the expiration of a temporary labour contract in July for Dominick’s union employees. It was amid a labour dispute, with workers threatening to strike over the terms of a new contract, that Safeway made its decision to sell the chain.