Merrill Lynch lowers Safeway rating to 'sell'

MMR, Sept 24, 2007

MERRILL LYNCH LOWERS SAFEWAY HATING TO 'SELL': Merrill Lynch downgraded its rating of Safeway Inc, to "sell" from "neutral," citing its belief that the retailer's shares will underperform through the rest of the year and possibly into 2008. The brokerage firm contends that a slowing economy, the impending arrival of new competition from Tesco PLC and the likelihood that Wal-Mart Stores Inc.

will respond with a new format of its own all suggest that Safeway will have to revamp its pricing strategy or risk losing sales volume. Even if it does lower prices to protect sales, the supermarket operator will see an impact on its margins, Merrill Lynch said in its report.