business news in context, analysis with attitude

Numerous published reports about Safeway CEO Steve Burd’s presentations yesterday at investment conferences suggest the path the retailer plans to take in coming months.

Burd said that the Southern California labor agreement, reached after a four-plus month strike/lockout, should lower the gap by a third between it and non-union shops such as Wal-Mart, with almost 90 percent of the savings coming from lower wages and benefits for newly hired employees. Ongoing employees, Burd said, “feel good that we found a way to get [the pay gap reduced] that doesn't impact them in any serious way,” according to a report in the Los Angeles Times.

Burd said that the company is focusing on improved service and better perishables offerings as a way of turning Safeway’s fortunes around. In addition, Burd is saying that the company would like to shift to a “net cost” approach to buying that would eliminate promotional allowances.

However, there remains some doubt out in the heartland about Safeway’s ability to make the changes necessary to create a chain relevant to consumers’ lives. The Chicago Sun Times, for example, notes that “Dominick's aging grocery stores have a long way to go before they resemble a new prototype that the company's CEO described to analysts Wednesday.”

And Safeway isn’t completely out of the labor woods yet, as it now is negotiating a new contract in the San Francisco Bay Area, and there have been rumblings about organized labor there preferring to go on strike, rather than accepting the two-tier package finally agreed to in Southern California.
KC's View:
We think the attempt to shift to a “net cost” approach to buying is the best possible move by Safeway, though we have to admit that we’re less than inspired by Burd’s desire to improve customer service and perishables; after all, service and perishables are always what retailers point to as a priority when they’re trying to get their act together.

It’s not going to be easy. As Ray Charles once sang, “I Can Make It Thru The Days (But Oh Those Lonely Nights)…”