LONDON (FNS) -- Argyll Group here, which owns Safeway in the United Kingdom, said its ongoing $306.2 million (195 million pound) restructuring program will result in the loss of 4,800 jobs.
The program, called Safeway 2000, is aimed at making the United Kingdom's third-largest food retailer more competitive with its two rivals, J. Sainsbury and Tesco, both here.
Sir Alistair Grant, chairman of Argyll, said the goal is to boost Safeway's sales per square foot to $23.55 from the current $20.19 within the next three years. Even the new goal will remain significantly behind Sainsbury and Tesco, however, which have sales per square foot of more than $26.70.
Under the program, Safeway is restructuring its entire product range. It is increasing the number of private-label products it carries, which now account for about 43% of sales compared with 40% in 1993.
The chain also has adopted a more aggressive pricing policy, including the introduction of its new Savers line of private-label economy products, and has stepped up marketing spending, including an $11 million television advertising campaign. Changes in management structures at the stores will result in the loss of 3,000 jobs, with another 1,800 job cuts coming through the sale or closure of 20 Safeway stores and 104 Presto stores.
By the end of June the group expects to have 358 Safeway stores averaging about 22,400 square feet each and 106 Presto stores, mainly in Scotland, averaging 7,600 square feet.
Argyll instituted the Safeway 2000 program two years ago. The company expects to complete the restructuring by late summer.
The company has taken exceptional charges totaling $306.2 million to cover the costs of the restructuring. Of this, $125.6 million relate to fixed asset write-downs; $21.98 million to cash costs as a result of the store closures; $150.7 million to layoffs, training, logistics, property, consultancy and other costs related to the strategic review, and the remainder to the net loss on the sale of its Lo-Cost discount chain and other operations.
But Grant said the restructuring should result in cost savings of $53.4 million in the current year and another $94.1 million next year. There also will be savings in depreciation charges of $7.9 million this year and $15.7 million next year, he added.
The large exceptional charges were the reason Argyll reported a 63.1% drop in net profit after charges to $146.6 million on a 3.7% increase in sales to $9.1 billion for the year ended April 1. This compares with net profit of $397.5 million on sales of $8.8 billion the previous year.