Safeway to Cut 940 Jobs at Administrative Level

Safeway Inc., the nation’s third-largest supermarket operator, said Tuesday that it would eliminate 940 positions in an attempt to boost its sagging operating profit. Most of the cuts will be among administrative personnel.

The jobs represent about 13% of the Pleasanton, Calif.-based company’s 7,000-member administrative staff: Its total workforce numbers 172,000.

“Because of a prolonged economic downturn and a difficult operating environment, we need to lower the cost of doing business,” Chairman and Chief Executive Steve Burd said.

The layoffs won’t affect jobs at its 1,694 stores, just at its headquarters and 11 division offices across the country, including regional headquarters for its Vons and Pavilions chains.

Of the 940 jobs, 252 were open positions that the company decided not to fill and 416 jobs were eliminated Tuesday. The rest will be phased out over the next six to 12 months, Safeway spokesman Brian Dowling said.

All laid-off employees will be given outplacement counseling and a week’s severance pay for every year they have worked at Safeway, the company said.

Safeway executives declined to disclose the amount of annual cost savings the job cuts would yield. Those figures will be released with the company’s second-quarter earnings on July 24.

Like other U.S. supermarket chains, Safeway has been struggling to maintain its profit amid a weak economy and increased competition from discounters such as Costco Wholesale and Wal-Mart Stores Inc. Sales have been depressed at the same time workers’ compensation insurance and other employee costs have been rising, said Jeff Tryka, an analyst with Seattle-based Delafield Hambrecht, which has no investment banking relationship with Safeway.

To remain competitive Safeway has chosen to cut costs rather than raise the prices of its merchandise.

“When you have competition from the likes of Wal-Mart, it almost eliminates how much flexibility you have to raise prices,” Tryka said. Neither Tryka nor his firm own Safeway stock.

In its fiscal first quarter ended March 22, Safeway posted income from continuing operations of $196.2 million, or 44 cents a share, compared with $325 million, or 66 cents, a year earlier.

Safeway rose 33 cents to $19.83 on the New York Stock Exchange. The layoff announcement was made after markets closed.