Dominick`s reaches expiration date, shuts doors for good - FOX 35 News Orlando

Dominick`s reaches expiration date, shuts doors for good

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CHICAGO (Sun-Times Media Wire) -

The sell-by date was stamped more than two months ago, and shelves have been emptying for weeks. On Saturday, Dominick's shut its doors for good, the Chicago Sun-Times is reporting.

Dominick's owner, California-based Safeway Inc., announced Oct. 10 that it would exit the Chicago-area market by Saturday, saying the Dominick's operations were the lowest-performing of Safeway's business divisions and a drag on the company's finances. The 72 area Dominick's stores employed 6,600 people.

Though rumors had been rampant for a decade that Safeway wanted to sell the Dominick's chain, the breaking point came after Safeway decided to sell its Canadian stores. Safeway's strategy is to use a cash tax benefit of $400 million to $450 million from the Dominick's market exit to partly offset Safeway's tax payment incurred in selling the Canadian stores.

Yet, warning signs occurred much earlier.

Safeway closed 26 Chicago-area Dominick's stores from 2004-07 to jettison those with slow sales. In 2006, Safeway started a major renovation campaign to turn the remaining stores into "lifestyle" stores more akin to Whole Foods.

In November 2005, Dominick's workers approved new contracts that ended a long labor battle. During the fight, workers threatened to strike, prompting Safeway to try to sell the chain before reversing course.

Safeway bought Dominick's in 1998 for $1.2 billion plus debt when Dominick's had 116 stores and was lauded as having "an enviable reputation" as a leading grocer here.

Fierce new competition depleted Dominick's market share to 8 percent from 14.5 percent six years ago and from 24.4 percent in 2002, according to supermarket trade magazines. Dominick's incurred losses before income taxes of $35.2 million in the first nine months of 2013.

Rivals range the gamut, including Aldi, Costco, Mariano's, Trader Joe's, Wal-Mart and Whole Foods, as well as independent fresh-food supermarkets and convenience stores pushing upscale and organic food products.

Safeway has so far sold 15 Dominick's stores — four to Jewel-Osco and 11 to Roundy's, the parent company of Mariano's supermarkets. Both companies employ unionized work forces. Jewel said it would hire the 450 Dominick's workers at the stores it will acquire, while Mariano's said the former employees will have to apply for jobs.

Real estate sources tell the Sun-Times that Whole Foods has bought six Dominick's stores, but neither Safeway nor Whole Foods would comment.

The sources say Jewel, the dominant supermarket in the Chicago area, intends to buy as many as 16 more Dominick's stores, but must wait until after Dominick's closes because of antitrust concerns.

Pete's Fresh Market is eyeing the Dominick's in Oak Park as one of a handful of stores it may acquire early in 2014. "It's a possibility," Charlie Poulikis, a manager with the grocery chain based on Chicago's South Side, said Friday. "We looked at that store and two or three others."

Poulikis said the company has not decided for certain if it will buy any of shuttered Dominick's, but Pete's likely will announce if it's doing so by Jan. 20.

Early speculation centered on Kroger looking at the Chicago market to expand its Food 4 Less discount stores, but that talk died down after the Cincinnati-based Kroger bought Harris Teeter Supermarkets in October for $2.5 billion in order to gain a stronger presence in the southeastern U.S.

So the future remains uncertain.

One Dominick's store, at 255 E. Grand in Chicago's Streeterville neighborhood, closed more than a week ago.

Realtors say landlords of leased Dominick's stores at other locations may find it more lucrative to buy back the leases and parcel out the space to "hot" retailers that require smaller spaces.

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