Sean McAllister
Safeway has admitted to shareholders that the situation surrounding a possible takeover was stopping it from "competing full-bloodedly" with other supermarkets and was creating enormous uncertainty for head office staff.
Speaking at its annual general meeting, chairman David Webster said: "We are not trading as we would wish and are not doing the sort of things we would do if we were in a more normal trading environment."
However, one shareholder accused Webster of making excuses.
The shareholder said the bid announcement made in early January would not have made a large difference to the full-year results ending on March 2003, which showed a disappointing rise in like-for-like sales of 1%.
But in response, Webster said that the situation surrounding the various bids for the multiple was having a major impact on its business.
"We find ourselves in a very difficult and challenging position through no choice of ours," he said.
"It is simply the consequence of the Morrisons bid being referred to the Competition Commission.
"Otherwise we would have expected a resolution of the situation by Easter.
"It does have consequences. It means that we are not competing as full-bloodedly with Tesco, for example, as we would otherwise."
Webster said the business was now being run in a rather different way. "It needs to be run in a defensive way," said Webster, "and that is why we have turned down investment in new store openings.
"We don't want to be investing in format when we may change owners."
He added that the situation had also created uncertainty for the multiple's supplier base which was affecting day-to-day trading and creating concern about the level of financial support and funding manufacturers should give Safeway.
However Webster said he was confident the right strategy was being taken. "I think the action being taken by Carlos and the management team is entirely the appropriate action and in the interest of shareholders."
Safeway announced that like-for-like sales for the first quarter of 2003 were down 0.6%, despite increasing by 0.8% for the first six weeks.
Webster said the slowdown was due to strong growth in the comparative period last year, which benefited from the World Cup and the Queen's Golden Jubilee.
He described the first quarter results as a "resilient trading performance".

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