Safeway is the second largest supermarket chain in the US, known for its fresh produce, private label brands, and loyal following among millions of households. It‘s a company with a rich history dating back over 100 years, and one that has long been of interest to stock market investors.
But if you‘ve looked for Safeway‘s ticker symbol recently, you may have come up empty. The company was acquired and taken private in 2015, meaning its shares no longer trade on public exchanges. As a consumer, you can still buy groceries at your local Safeway – but you cannot directly buy its stock.
So what does Safeway‘s ownership structure look like today? Is there any way for investors to access the company‘s growth and profits? And how does Safeway stack up against other publicly traded grocery stocks from a business and investing perspective? Let‘s take a deep dive.
Safeway‘s Rise and Fall as a Public Company
Safeway has a storied history that in many ways mirrors the evolution of the modern grocery industry. The company was founded in 1915 by M.B. Skaggs, starting as a single store in American Falls, Idaho. Through a series of mergers and acquisitions over the next few decades, Safeway grew into one of the nation‘s largest food retailers.
Some key milestones:
- 1926: Safeway went public on the New York Stock Exchange under the ticker SWY. Its IPO price was $226 in today‘s dollars.
- 1928: Safeway operated over 2,000 stores, second only to The Great Atlantic and Pacific Tea Company (A&P)
- 1930s-1940s: Safeway expanded overseas, entering Canada, the UK, and Australia
- 1960s: Safeway surpassed A&P in sales, becoming the world‘s largest food retailer
- 1980s: Kohlberg Kravis Roberts (KKR) took Safeway private in a $4.25 billion leveraged buyout, only to re-IPO it in 1990
- 1990s: Safeway made a series of acquisitions including Vons and Randall‘s, while also exiting some international markets
- 2000s: Safeway launched its "Lifestyle" store concept and popular private brands like O Organics as its growth slowed
At its peak in the early 2000s, Safeway had over 1,700 stores across the US and Canada generating north of $35 billion in annual sales. Its stock price hit an all-time high of $60 in 2007, giving it a market capitalization of over $17 billion.
However, Safeway soon began to face intensifying competition and profitability pressures on multiple fronts. Walmart, Target, and Costco were gaining share with their low-price models. Kroger was consolidating the traditional grocery space. Whole Foods was capturing the premium natural/organic segment. And Dollar General and Aldi were undercutting Safeway on the value end.
As a result, Safeway‘s US market share slowly eroded from 8% in 2001 to 5% by 2014, according to data from Euromonitor. Its sales growth flattened and its margins contracted, causing its stock price to stagnate.
US Grocery Market Share by Company:
| Company | 2001 | 2010 | 2014 |
|---|---|---|---|
| Walmart | 15% | 21% | 25% |
| Kroger | 10% | 10% | 11% |
| Safeway | 8% | 6% | 5% |
| Costco | 3% | 4% | 5% |
| Albertsons | 6% | 3% | 4% |
| Publix | 3% | 3% | 4% |
Source: Euromonitor International
After conducting a strategic review in 2014, Safeway ultimately decided to sell itself to a consortium led by Cerberus Capital Management for $9.2 billion. The deal closed in early 2015, and Safeway merged with Albertsons, another struggling supermarket chain that Cerberus had previously acquired out of bankruptcy.
Safeway shareholders received $34.92 per share in cash and stock of the newly combined private company. Safeway‘s 89-year run as a publicly traded grocer was over.
Who Owns Safeway Today?
Since 2015, Safeway has been a brand and subsidiary of Albertsons Companies, the second-largest supermarket operator in the US behind Kroger. Albertsons Companies was formed by the merger of Safeway and Albertsons, orchestrated by Cerberus, a New York private equity firm with a long history of buyouts in the grocery industry.
Today, Albertsons Companies operates nearly 2,300 stores across 34 states under 20 different banners. In addition to Safeway and Albertsons, these banners include:
- Vons
- Jewel-Osco
- Shaw‘s
- Acme
- Tom Thumb
- Randalls
- United Supermarkets
- Pavilions
- Star Market
- Haggen
In fiscal year 2021, Albertsons Companies generated $71.9 billion in sales and $4.3 billion in adjusted EBITDA. It employs over 300,000 people, making it one of the largest private employers in the US.
While Albertsons does not disclose specific financial results for the Safeway banner, it is estimated that Safeway locations represent around a third of Albertsons‘ total sales. Safeway remains one of Albertsons‘ most important brands, especially in key markets like California, Colorado, Washington state, and the Mid-Atlantic region.
From an ownership perspective, Albertsons Companies is majority-controlled by funds managed by Cerberus. However, in mid-2020, Albertsons began selling a portion of its stock to public investors via an initial public offering on the New York Stock Exchange. Today, its ownership structure looks like this:
- Cerberus-led investor group: 50.8%
- Public shareholders: 47.4%
- Kimco Realty Corporation: 1.8%
The IPO allowed Cerberus to begin gradually cashing out its investment in Albertsons/Safeway after several years of ownership. Over time, Cerberus may continue to sell down its stake via secondary stock offerings.
Kimco Realty, a real estate investment trust, obtained its small ownership position in Albertsons when it merged a portfolio of grocery-anchored properties into the company in 2006.
How to Invest in Safeway‘s Parent Company, Albertsons
Even though you cannot directly purchase Safeway stock today, you can invest in its parent company, Albertsons (ticker: ACI). By buying shares of Albertsons on the NYSE, you are gaining economic exposure to Safeway as well as Albertsons‘ other supermarket brands and operations.
The basic steps to buy Albertsons stock are:
- Open an account with a licensed brokerage firm that offers access to NYSE stocks
- Fund the account via bank transfer or other methods
- Search for and select the stock symbol "ACI"
- Enter the number of shares you want to purchase (or the dollar amount you want to invest)
- Choose your order type (market or limit) and time frame (day or good-til-canceled)
- Review and submit the trade
Before investing in any individual company, it‘s important to review its fundamentals, valuation, growth potential, competitive position, management, and risk factors. And consider how the stock fits within your overall portfolio construction and asset allocation.
Some key financial metrics and ratios for Albertsons Companies (as of June 2022):
- Market capitalization: $15.5 billion
- Annual revenue: $71.9 billion
- Net income: $1.6 billion
- P/E ratio: 9.8x
- Dividend yield: 1.8%
Source: company filings, Yahoo Finance
As a mature company in a low-margin industry, Albertsons tends to trade at a lower P/E multiple than the broader stock market. It also tends to have more debt and less growth than younger, tech-oriented companies.
However, Albertsons has been working to gradually expand its sales and profitability through:
- Remodeling stores and improving the customer experience
- Expanding its private label offerings, which carry higher margins
- Investing in e-commerce and digital capabilities to meet changing consumer habits
- Optimizing its supply chain, inventory, and promotional strategies to reduce waste
- Paying down debt and strengthening its balance sheet
Still, these initiatives require heavy and ongoing investments, which can pressure cash flow. Albertsons‘ success is not guaranteed, especially as competition remains fierce. Walmart, Amazon, Dollar General, Aldi, Trader Joe‘s, Grocery Outlet, and others continue to open new stores and vie for grocery dollars.
Comparing Safeway/Albertsons to Other Grocery Stocks
Of course, Albertsons is not the only grocery stock available to investors – far from it. The US supermarket industry is large and fragmented, with thousands of chains and independent operators vying for a share of the ~$750 billion market.
Other notable publicly-traded grocers include:
- Kroger (KR): The nation‘s largest traditional supermarket chain, with over 2,700 locations across 35 states and over $130 billion in annual sales. Known for its data-driven personalization and private label prowess.
- Walmart (WMT): The top US grocer by sales, with over 4,700 Walmart and Sam‘s Club stores domestically. Roughly 60% of its revenue comes from groceries. Focused on an everyday low price model.
- Costco (COST): A dominant club warehouse retailer with over $100 billion in US sales, nearly 75% of which are from groceries and consumables. Known for its high-quality private label Kirkland brand.
- Amazon (AMZN): Became a top-10 grocer overnight when it acquired Whole Foods for $13.7 billion in 2017. Now expanding its Amazon Fresh banner and online grocery presence. Focused on speed, convenience, and technology.
- Ahold Delhaize (AD): Netherlands-based parent company of US chains like Stop & Shop, Food Lion, Giant, and Hannaford. Operates over 2,000 stores and generates over $50 billion in sales across the East Coast.
- Publix (PUSH): The largest employee-owned company in the US, with over 1,200 stores concentrated in Florida and the Southeast. Known for its stellar customer service and prepared foods.
- Sprouts Farmers Market (SFM): Specializes in natural and organic groceries at competitive prices, with over 380 stores in 23 states. Expanding at 10% per year.
When evaluating any grocery stock, investors should consider its:
- Size and scale within its key markets
- Comparable store sales growth and market share trends
- Profitability metrics like gross margin, operating margin, and return on invested capital
- Balance sheet strength and liquidity
- Pricing and promotional positioning vs. peers
- Omnichannel capabilities (in-store, delivery, pickup, ship-to-home)
- Private label penetration and brand equity
- Real estate footprint and ability to secure attractive new locations
- Management team and strategic vision
- Valuation relative to earnings, cash flow, and long-term growth potential
By these measures, Kroger, Publix, and Costco are often viewed as the strongest and most consistent operators in the grocery space. They have produced steadier comp sales, higher margins, and greater returns for shareholders over time.
In contrast, Albertsons/Safeway has relatively high debt, low margins, negative comps, and a more challenged competitive position in some of its banners and markets. It is more of a turnaround story that will need to prove it can successfully integrate and grow its various businesses under one company.
The Pros and Cons of Investing in Grocery Stocks
As a consumer staples sector, grocery stocks are often prized by investors for their defensive and non-discretionary characteristics. No matter the state of the economy, people still need to eat – providing grocers with a relatively stable revenue base. The industry also has high barriers to entry and economies of scale, favoring incumbent players.
However, supermarkets face a number of challenges that can make them less attractive investments than companies in other sectors:
Pros:
- Recurring, non-discretionary sales
- High purchase frequency and customer lifetime value
- Opportunity to build brand loyalty via private labels
- Economies of scale in buying and distribution
- Real estate ownership and prime locations
- Recession-resistant nature of grocery spending
Cons:
- Low profit margins in the 2-4% range, vulnerable to small cost increases
- High fixed expenses and operating leverage
- Excess capacity and price competition, as the US is "overstored"
- Lack of product differentiation between chains
- Commodity and fuel price volatility
- Labor intensity and rising wage pressures
- Disruption from e-commerce and meal delivery models
- Food deflation and "trading down" behavior among shoppers
- Saturated market with little population growth
Weighing these pros and cons, the US supermarket industry is best characterized as a mature, slow-growth, and capital-intensive space. Even the best-run grocers are unlikely to produce the kind of rapid and dynamic growth seen in sectors like technology, healthcare, or consumer discretionary.
For this reason, grocery stocks tend to trade at below-market earnings multiples of 10-20x, and appeal mostly to conservative, income-oriented investors. Many of the leading companies pay quarterly dividends in the 1-3% range to reward shareholders.
The Future of Safeway and the US Grocery Industry
Looking ahead, the US grocery industry is likely to see continued consolidation, digitization, and evolution. Today, the top 10 chains control around 70% market of the market, up from 50% in the early 2000s. This concentration is expected to keep rising as the largest players leverage their scale to expand.
At the same time, the industry is being reshaped by a number of external forces and shifting consumer trends:
- E-commerce and on-demand delivery, led by Amazon and Instacart, are capturing a growing share of grocery sales and blurring the lines between physical and digital channels
- Health and wellness concerns are driving demand for organic, plant-based, functional, and Better-For-You products, benefiting chains like Whole Foods and Sprouts
- Value-oriented consumers are gravitating toward private label offerings, putting pressure on national CPG brands and traditional grocers that rely on them
- Prepared foods and foodservice offerings are becoming a larger part of the grocery store mix, as people seek convenience and alternative to restaurants
To stay competitive in this changing landscape, Safeway and Albertsons will need to accelerate their omnichannel capabilities, modernize their store bases, improve their customer data and personalization, and differentiate their assortments. They‘ll need to find the right balance between physical and digital, national brands and private labels, value and quality, service and self-service.
At the same time, investors will be watching closely to see if Albertsons can successfully integrate Safeway and its other banners, realize post-merger synergies, deleverage its balance sheet, and reignite earnings growth. If it succeeds, Albertsons could be an intriguing turnaround play in the grocery space. If not, it risks falling further behind its competitors.
While Safeway itself may never be a pure-play public company again, its brand will continue to live on through Albertsons, influencing where millions of Americans shop and what they buy. The next chapter of this century-old business is still being written.
