Safeway Inc. (SWY): Four Red Flags for This Ailing Grocer

4. Unhappy unionized workforce
New CEO Robert Edwards, former Safeway CFO, has inherited a tough company to manage. Nearly 80% of Safeway’s employees are represented by collective bargaining agreements — in other words, they are unionized. To keep its employees on the job, Safeway needs to negotiate with nine different international unions. Certainly not an easy task, and at present Safeway has over 430 collective bargaining agreements that typically last three to five years. Thus, management is almost always negotiating. And, despite being represented by unions, the workers aren’t very happy. According to Glassdoor.com, only 36% of employees would recommend Safeway to friend and only 37% approved of former CEO Steve Burd. By contrast, 75% of Wegmans employees would recommend the company to a friend, and 86% approve of CEO Danny Wegman. 

Foolish bottom line
Safeway is facing stiff competition, falling margins, slow growth, debt, and off-balance-sheet obligations. And its management and employees will face an uphill battle to turn the business around. For now, investors should tread carefully around this stock. 

The article 4 Red Flags for This Ailing Grocer originally appeared on Fool.com is written by Brendan Mathews.

Brendan Mathews is short shares of Safeway. The Motley Fool recommends Amazon.com, Costco Wholesale, and Whole Foods Market. The Motley Fool owns shares of Amazon.com, Costco Wholesale, and Whole Foods Market.

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