Safeway Closing 12 Dominick’s Markets

Safeway Inc., the third-largest U.S. supermarket company, said Monday that it would close 12 unprofitable Dominick’s stores in and around Chicago that employ about 800 workers after failing to find a buyer for the chain.

The store closings will result in as much as $55 million in pretax costs in the first quarter to exit leases, according to Safeway, which is headquartered in Pleasanton, Calif.

The company didn’t say how many jobs would be eliminated. The stores, including four in Chicago, will close March 13.

The grocer, which ended efforts to sell the 113-store chain in November after a potential buyer failed to reach a new labor agreement with unions, said it was working with the United Food and Commercial Workers union to help employees find positions at other stores. Safeway bought Dominick’s in November 1998 from Los Angeles private-equity firm Yucaipa Cos. for $1.85 billion in cash and debt.

“There definitely were some stores that just weren’t making money,” said Jason Whitmer, an analyst at FTN Midwest Research. “If you get rid of those, you start on the right footing for the next wave of business at Dominick’s.”

Safeway had been trying to sell the Chicago-area Dominick’s chain since 2002 after it failed to negotiate a more favorable labor contract.

Workers at Safeway’s Vons and Pavilions, Kroger Co.’s Ralphs and Albertsons Inc. stores in Southern and Central California have been on strike or locked out since Oct. 11 in a dispute over health-care costs. The three largest supermarket chains are trying to cut expenses as discount retailer Wal-Mart Stores Inc. prepares to open stores in California that also will sell groceries.

Shares of Safeway rose 2 cents to $22.27 on the New York Stock Exchange. They fell 6.2% last year. The company trails Kroger and Albertsons in annual sales.