• Retailers try to roll with labor disputes and weighty competition

The two Portland stores that Safeway Inc. closed on Christmas Eve were among its 'smaller and older' outlets, but a spokeswoman said that doesn't mean the company is retrenching locally.

Quite the contrary, said Public Affairs Director Bridget Flanagan. Safeway's Oregon division, which includes 102 stores in Oregon and 17 in southwest Washington, is steaming ahead. The Pleasanton, Calif.-based company opened six new stores in the regional division in the last two years, and plans to remodel another two dozen existing outlets this year, at a cost of $2 million per store.

Another major retailer, Toys 'R' Us, is closing its Lloyd Center store, due to company financial restructuring.

Safeway's new 'Lifestyle' concept supermarket Ñ the new Safeway in St. Johns is an example Ñ features expanded delis, more organic food choices and a generally broader selection of items, the result of focus groups where Oregon and California shoppers were asked what they wanted in a supermarket.

'They're magnificent stores,' Flanagan said. 'Very welcoming,' thanks in part to new, warmer color schemes, again done in response to focus groups.

All 73 employees at the two closed stores, which were at Southeast 82nd Avenue and Powell Boulevard, and at Tigard Plaza, have moved on to new jobs with Safeway, Flanagan said.

But Safeway, as well as Albertson's Inc. and Kroger Co.-owned Fred Meyer, Portland's three leading grocery chains, haven't entirely shed the aftereffects of a five-month lockout in Southern California that ended 10 months ago. It's heightened the struggle for corporate managers, already working in a business notorious for net profit margins of 1 percent to 1 1/2 percent.

Some 59,000 store employees were out of work during the labor dispute, and the companies lost an estimated $1.5 billion in sales.

Safeway and Boise, Idaho-based Albertson's still haven't returned their earnings to predispute levels. Retail analysts say profit margins at Kroger, which is based in Cincinnati, have been hurt by discounting efforts to counter lower-priced competition.

In another dispute, the announcement just before Christmas that the three chains had reached a tentative labor agreement with 19,000 Northern California supermarket workers, after 10 months of negotiations, sent an almost audible sigh of relief through the industry.

The United Food and Commercial Workers Union Local 588 was close to its deadline for a strike vote when an agreement was reached.

In Portland, the 8,000 members of food workers' union Local 555, who work at Safeway, Fred Meyer, QFC, Albertson's, Haggen's and other union stores signed a contract in November 2003 that runs through 2007.

Seattle-based supermarket consultant Bert Hambleton, whose Hambleton Resources follows the industry, said the lengthy California lockout created its own set of problems for grocers, whose customers started shopping elsewhere to avoid picket lines and now may feel disinclined to return.

'The longer it goes on, the less likely people are to rebound Ñ they're in a new pattern,' he said.

The strike doubtless was good news for nonunion Costco Wholesale Corp., the Seattle company whose warehouse stores increasingly are the grocery shopping destination for many people.

Also, Hambleton said, the marketplace now includes a whole new range of stores such as Whole Foods, Wild Oats and Trader Joe's. 'With all these new players the category is broadening, and nobody in the (traditional) category wanted that to happen.'

In Portland, the marketplace will change still more when mega-retailer Wal-Mart starts opening Supercenters here.

Bentonville, Ark.-based Wal-Mart, the world's largest retailer, is planning to put its first Portland-area Supercenter at Southeast 182nd Avenue and Powell Boulevard, site of a vacant QFC supermarket that closed in 2001.

Hambleton said the new store is most likely to cause trouble for WinCo Foods and Food4Less, the food retailers that now occupy the thrifty end of the marketplace.

'Where those (retailers) don't exist, Fred Meyer becomes the one that's going to have a headache with Wal-Mart,' he said.

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