The hunt is on for a new chief executive at Safeway following the resignation of longtime chairman and CEO Steve Burd.
Burd, 62, is scheduled to retire at the company’s annual stockholders meeting on May 14 and will aid in the search of his successor that is said to include internal and external candidates. Burd joined Safeway in October 1992 as president and was appointed CEO in May of the following year.
"I feel this is the right time to move forward with a transition plan," Burd said. "The company is gaining market share with each passing quarter. We have developed the most sophisticated digital marketing platform in retail, we are implementing the most comprehensive and personalized fuel loyalty program, and we will be rolling out a wellness initiative that has the potential to transform the company."
Burd said he still has the high level of energy and enthusiasm he brought to the company 20 years ago, but wanted more personal time to further pursue his interest in health care.
According to Safeway, under Burd’s leadership the company has become one of the nation's most recognized leaders in health care. In the last eight years, Safeway has introduced innovative design and practice features into its health plans that helped control cost. As a result, while the average U.S. company experienced an 8% annual growth in employer health care costs from 2005 through 2011, Safeway averaged a 2% annual growth rate for both the employer and employee contributions, according to the company.
Safeway went on to note that Burd’s accomplishment included establishing a culture of thrift and capital discipline, creating an industry-leading customer service program, developing the "Lifestyle" store format, introducing a level of quality in perishable products that had never been seen in food retailing, and forming a leading prepaid payment network "Blackhawk" that has become one of the largest distributors of gift cards in the world. He also accelerated the company's efforts in charitable giving and sustainability.
While Safeway understandably sang Burd’s praises in announcing his departure, whoever fills his shoes faces an uphill battle. Safeway is a heavily unionized, traditional supermarket retailer with a moderately declining store base that numbers 1,644 units. Its markets share is under assault from all manner of unconventional retailers. Marginally profitable and with long term debt of $6.4 billion, Safeway faces a long list of challenges to improve the profitability of its $43.6 billion operation and reward shareholders who have suffered of late.
The company noted that Burd's arrival at Safeway coincided with extraordinary growth in new food retail formats, virtually all of which were non-union. Even though these factors put downward pressure on both sales and margins, the combination of strategic initiatives and cost reduction efforts enabled Safeway to outperform the S&P 500 over the last 20 years. However, much of that performance came during the first half of Burd’s career as Safeway’s stock occasionally traded above $60 for a several year period beginning in the late 90s. It’s been all downhill ever since with shares unable to break above $20 since last summer.