US supermarket Safeway has given up its year-long effort to sell its struggling 113-store Dominick's chain in the Chicago area.

Safeway said the unidentified winning bidder for Dominick's had not been able to negotiate a new labour contract with the union representing most of the chain's 8,000 workers.

Safeway boss Steve Burd it would now focus on “improving Dominick’s operations” rather than selling for an “unacceptably low price”.

To turnaround Dominick's, Safeway has appointed former boss of its Randall’s Food Markets, Randall Onstead, to “lead the effort to bolster the chain”.