Safeway's (NYSE:SWY) stock rose $2.18 to close at $33.75 a share on Friday (October 11), soon after the grocery mega retailer announced it was selling off its 72 Dominick's stores.
The move also means that Safeway will get out of the challenging Chicago grocery market, which has caused a "noticeable drag" on Safeway's financial results and a "significant drain" on resources, CEO Robert Edwards said on a conference call with analysts, Reuters reported.
Safeway's net income plummeted to $65.8 million, or 27 cents per share, in its fiscal third quarter that ended on September 7, compared with $157 million, or 66 cents per share, a year earlier. By selling off the Dominick's stores–likely to be completed early next year–Safeway expects a cash tax benefit of $400 million to $450 million.
Safeway has seen "significant interest" since it started to market Dominick's assets, according to Edwards. The retailer already sold four Dominick's stores to the company running rival chain Jewel-Osco.
Supervalu Inc. (NYSE:SVU) got out of the Chicago market in March, when it sold Jewel-Osco and other chains. Safeway's and Supervalu's profits have suffered at the expense of newer Chicago entrants such as Roundy's (NYSE:RNDY) Mariano's chain.
-See this Reuters article