Safeway, which operates grocery stores under its own name and regional chains such as Vons and Randalls, had recently seen its sales trends improve somewhat after struggling in the face of heightened competition and a weak economy.
The supermarket chain came under pressure last month from activist shareholder Jana Partners LLC, which disclosed that it had acquired a stake of roughly 6% and said that it had spoken with Safeway management about shedding some of its unprofitable markets and returning more capital to shareholders. Jana Partners also urged Safeway to consider shedding its remaining stake in the gift-card business the supermarket chain spun off earlier this year.
On Thursday said the planned exit from the Chicago market is expected to produce a tax benefit of $400 million to $450 million that would partly offset tax expenses related to its pending sale of its Canadian business. The company also said some proceeds would be used for stock buybacks and to invest in growth opportunities.
Safeway said that Dominick's, which was still considered part of its continuing operations in the latest quarter, incurred pretax losses of three cents a share in the latest quarter and nine cents a share for the first 36 weeks of 2013.
Safeway has already made several strategic moves this year, including a deal to sell its Canadian operations for $5.7 billion, more than analysts expected. The company also spun off its gift-card unit into a publicly-traded company, Blackhawk Network Holdings Inc. HAWK +4.00% .
Safeway reported a profit of $65.8 million, or 27 cents a share, down from $157 million, or 66 cents a share, a year earlier. Excluding the write-down of a warehouse information software project and other items, adjusted earnings from continuing operations were down at 10 cents from 16 cents. Meanwhile, overall adjusted income attributable to Safeway was 30 cents a share.
