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3 O'Clock High: Safeway Mailbag

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"Everybody wants some!"

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Minyan Uppity writes:

Captain O' Captain,

Sorry you couldn't find diapers at the Safeway
(SWY) last week. On the list of things that can go wrong for a new parent, being diaper-less has to be near the top. While the experience left you hanging, I'm not sure Safeway is really trying to replace Wholefoods (WMFI) in terms of a shopping experience.

There will always be a large segment of the market that shops at conventional supermarkets (for things like diapers, for example), and Safeway's remodel is intended to separate its stores from the Krogers (K), Albertsons (ABS) and Wal-Marts (WMT) of the world. Given that Albertson's - Safeway's closest competitor - has thrown in the towel, the guys at Safeway seem to be doing something right (or not as bad as Albertsons).

I can't promise your shopping experience is going to improve at your local Safeway but I do think that business is about to get much better for the company. When the private equity guys turn the 650 Albertson's stores that Supervalue (SVU) didn't buy into bowling alleys, Bed Bath & Beyonds (BBBY) or even Whole Foods, I think your competition for nappies is going higher. For a high operating leverage operation like a grocery store, losing your top competitor is a windfall.

My advice: buy a little SWY and stockpile diapers.


Uppity,

The worst thing that could happen to a new parent is falling asleep in front of a crackling fire with their newborn tucked safely under their chin then having horribly vivid dreams of their throat being attacked by some mewling, befanged raccoon.

Running low on diapers isn't even close to the top of the list. Among the positives about diaper shopping is that it gives the errand-running parent a chance to get out of the house and experience Safeway's special brand of destination shopping.

I like Safeway much more as a stock idea than as a place to shop. To a point that touches on each, I agree on the remodels creating separation between Safeway and Krogers. By coincidence, just yesterday at Safeway I found myself thinking "Empty shelves, no customer service and boxes in every single aisle... wow, this is just like shopping at RadioShack (RSH)!"

But I'm pretty sure that wasn't Safeway's goal, either.

I'll have more on Safeway next week. In the meantime, I'm off for Friday afternoon Tee. Have a safe and happy weekend, Minyans!

No positions in stocks mentioned.

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