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Safeway considering possible sale

Safeway has confirmed that it is in discussions concerning a possible transaction involving the sale of the company. However, the company declined to comment further at this time.

"Although the discussions are ongoing, the company has not reached an agreement on a transaction, and there can be no assurance that these discussions will lead to an agreement or a completed transaction," Safeway stated as part of its earnings release.

Earlier this week, Credit Suisse research analyst Ed Kelly speculated that an outright sale to Cerberus/Kroger would be the best-case scenario for investors.

Safeway is postponing its annual investor conference, which had been scheduled for early March 2014, the grocer announced.

Separately, the company has decided to distribute the remaining 37.8 million shares it owns of Blackhawk Network Holdings (approximately 72.2% of the outstanding Blackhawk shares) to Safeway stockholders. Currently, the plan is to make the distribution on a pro rata basis to all Safeway stockholders in a transaction intended to be tax-free to Safeway and its stockholders. However, if the company consummates a sale transaction, the distribution may be taxable. The timing and details of the proposed distribution will be determined in the near future, and further announcements will be made when those decisions have been finalized.

In addition, Safeway owns 49% of Casa Ley S.A. de C.V., the fifth largest food and general merchandise retailer in Mexico based on sales. Based on Casa Ley's improving performance, the company believes it is an appropriate time to explore alternatives to monetize its investment in Casa Ley.

Safeway reported sales and other revenue totaled $11.3 billion in the fourth quarter of 2013, a 0.9% increase. An identical-store sales increase (excluding fuel) of 1.6% was largely offset by a decline in fuel sales. For the year sales were $36.1 billion in 2013, essentially flat compared to 2012. Identical-store sales increases (excluding fuel) of 1.7% and higher other revenue were offset by lower fuel sales and the disposition of Safeway's Genuardi's stores.

"We are pleased with the progress we made in 2013," stated Robert Edwards, Safeway's president and CEO. "Strategies to grow sales and improve operating profit dollars have begun to produce results. In 2013, we generated our best volume growth since 2006, and we had our best identical-store sales growth in the last five years. At the same time, we continue to pursue strategies to enhance momentum and increase shareholder value. We look forward to continuing progress in 2014."

Safeway posted net earnings from continuing operations of $100 million (35 cents per diluted share) for the fourth quarter of 2013, representing a 41.4% decline as compared to $170.7 million ($0.71 per diluted share) for the fourth quarter of 2012. The fourth quarter of 2013 includes a $57.4 million loss ($0.14 per diluted share) on foreign currency translation, a $30 million loss ($0.08 per diluted share) from the impairment of notes receivable and a $9.7 million gain (net of noncontrolling interest of $3.8 million) ($0.04 per diluted share) from the reduction of contingent consideration related to Blackhawk's acquisition of Cardpool.