Safeway Inc. said on Thursday it plans to leave the Chicago market by early next year as it continues to narrow its focus and posted a sharply lower profit for the third quarter.
The shares of Safeway, the second-largest U.S. mainstream grocery store operator, rose to $33.35 after hours after closing at $31.57 on the New York Stock Exchange.
Chicago is a competitive market for food stores. Newer entrants such as Roundy Inc's (RNDY.N) Mariano's chain, which features piano players in its stores, have gained ground with shoppers looking for a higher-end experience, while Aldi Inc has added more stores that draw cost-conscious customers. Wal-Mart Stores Inc (WMT.N), Target Corp (TGT.N), privately held Meijer Inc and other retailers have also focused more on food sales.
The Dominick's chain in Chicago has been a "noticeable drag" on Safeway's financial results, a "significant drain" on resources and its lowest performing division, Chief Executive Officer Robert Edwards said on a conference call with analysts.
Safeway bought Dominick's in 1998 for about $1.2 billion plus debt. The chain had 116 stores and $2.6 billion in sales back then, when Safeway lauded Dominick's "enviable reputation as a leading retailer in the Chicago region." Safeway now has 72 Dominick's stores in the market, which incurred losses before income taxes of 3 cents per share during the latest quarter.
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