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Safeway Inc. Message Board

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  • pine52x pine52x Aug 28, 2012 11:38 AM Flag

    Value or Value trap

    I don't shop at WFM, but obviously they have found a growing market and their shareholders have been rewarded. My question is why doesn't SWY try to emulate WFM in a new store opening or two. Maybe they could call the new stores "Safeway Organics" or some thing like that. Or don't even use the Safeway name in it.

    Burd has said that grocery is not going to grow the company. Yet, WFM is growing quite fast. What prevents SWY from getting in on that? I just don't know if developing the real estate is going to compensate for the fall off in groceries. I think Wall Street feels the same.

    I have done a lot of research on SWY over the last week. I went into it quite positive. As I end it, I am feeling less optimistic. In fact, any move toward the high teens and I think I now would sell out. I guess I have come to the conclusion that while there are some real positives in the company, there are just as many negatives. It's kind of like a roll of the dice.
    If the economy falters any more, competition is really going to get fierce. I hate to buy a stock and "hope for the Best". But that is kind of the way I feel now. Of course in doing the research, I found very few positive comments about SWY. I will admit that often happens at bottoms. On the other hand, shorts are quite smart. They are like buzzards, they only circle the dead or the dying. So a big short position worries me as well. CEO Burd promises that shareholders will not loose in the end. He definitely has faith in what he is doing. But I just don't know if the non-core operation where he has put his focus can make up for the decline in the grocery business.

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    • Why does Safeway need to grow at all to make an investor here do well?

      This company is at four times free cash flow, with $35 per share of real estate.

      If I were the sole owner of Safeway, I wouldn't care about growing. I would care about continuing to exist, continuing to generate free cash flow, and continuing to buy, build, and develop real estate.

      Now, on the other hand, If I were the sold owner of Whole Foods, I would be worried about growing. It would be the focus of my business.

      It all depends on the price you pay for the business. WFM needs to grow... It HAS to grow or the buyers at $90 will lose their shirts.

      Safeway doesn't have to do anything other than exist at this level and do smart things with their money, and the buyers at $15 will do very well.

      • 3 Replies to robert_townsend2
      • Yeah Robert FCFs are guaranteed.

        OH wait a minute FCFs were $1.5 billion then fell to $1 billion then are projected at $850 million.lets just round it off to $1 billion. what's $150 mil anyway. Spare change for this company. I am projected $600-700 mil fcf when pricing reality sets in with mgt crew. still not all that bad imo if debts are brough under control rather quickly.
        shoppers KNOW which stores are pricey. U ain;t going to fool'em I use the expensive stores for major sales items raping. Nothing else.

      • It is called denial

        asked one question.
        87% of stores converted to lifestyle format. where is the boost to cashflows or fcf's?

        The response they do not need to grow!!

        Lets spend a few billion on lifestyle conversions and get flat return???????

        Oh I mean LOWER fcf's I mean substantially lower FCFs. Does this concern anyone that they are just staying in place after billions in massive cap ex conversion?

        Just shows how brutal competition is these days and disposable incomes come under assault of rising food, energy and cost of living expenses.

        Yes imo whole foods is overhyped and over expensive too, BUT they are booming.

      • Robert_town: I tried to find it, but could not find a way to put a $ figure on the real estate value. I realize that your $35 per share estimate is likely just an educated guess, but even if I knew for certain it were ONLY around $15 per share, that would be reassuring to me.

    • I find shorts are quite dumb as they always short at the lows missing over 75% of a price drop.

      Also I have never seen any high flying stock get shorted within 50% of its highs. Look to former high flyer GMCR heavily shorted below $30 when GMCR traded above $115. And SWY is still even more shorted than crash & burned GMCR.

      As for WFM, I really do not see what the big shopping draw is for overpaying 50% to 75% more on a grocery bill for having a limited food selection on organic food that really does not taste that much better.

      SWY shorts are pairing their shorting of a less than 8 P/E stock by going long WFM with a P/E over 40. When WFM crashes and burns, the margin calls on the SWY shorts will be swift and severe and SWY will be soaring over $30.