Ajay Jain Comments: Burd’s Exit To Create Gap At Safeway

January 7, 2013, CNBC

The retirement of longtime Safeway CEO Steve Burd will create "a difficult gap to fill" at the grocery store chain, an analyst said Thursday. But another analyst said many investors would like to see a change.

Safeway announced Wednesday that Burd will retire in May after more than 20 years with the company. The 63-year-old Burd started at Safeway Inc. as president in October 1992 and became its CEO months later.

The Pleasanton, Calif., company said that it will search both internally and externally for a successor.

Deborah Weinswig of Citi Investment Research said in a client note that while it will be difficult for Safeway Inc. to find a new CEO to fill the gap, Burd is leaving the chain well positioned for revenue growth this year as its "Just for U" customer loyalty program continues to gain traction.

Weinswig maintained a "Buy" rating.

Cantor Fitzgerald’s Ajay Jain said it’s still too early to tell if the "Just for U" program is resonating with shoppers and providing a meaningful boost to Safeway’s sales.

"While we believe many investors welcome the prospect of a leadership change at Safeway, we think fundamentals could get worse in the near term before they get better," the analyst wrote.

Jain reiterated a "Sell" rating and $14 price target.

Shares of Safeway fell 4 cents to $18.31 in afternoon trading Thursday. They have rebounded from a 52-week low of $14.73 in mid-July. They traded as high as $23.16 last February.