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Monday, 26 November, 2001, 19:06 GMT
Safeway cyberstore shuts up shop
Grab from Safeway's website
Safeway's website will be celebrating no longer
Safeway, the UK's fourth-largest supermarket chain, has closed down its online grocery shopping service.

The company, which is mid-way through an extensive store refurbishment programme, said the cash needed to develop its online operation would be better spent upgrading its shops.

"It was decided to redirect these resources into the core business. This wasn't a reflection of how successful (the online store) was, but to take it forward would require a large cash injection," a Safeway spokeswoman said.

Although Safeway decided to shut down the online store one month ago, the decision wasn't made public until Monday.

Vulnerable to downturn

The announcement came as investment bank Schroders Salomon Smith Barney downgraded its rating of Safeway stock, arguing that the company's heavy investment in store refurbishment is likely to put profit margins under pressure.

Also on Monday, debt rating agency Moody's Investors Service warned that Safeway may find it difficult to remain profitable if retail market conditions become tougher.

Many analysts are predicting a decline in UK retail sales early next year as the economic slowdown takes hold.

Safeway shares were trading 10p lower at 317p at 1730 GMT.

Last week, the company said that sales and pre-tax profits rose by 6% and 8% respectively during the six months to mid-October, slightly below expectations.

Tesco cyberstore sill number one

Safeway's online operation, launched in April this year, allowed users to buy groceries over the internet and collect them from one of eight participating stores.

A separate online wine shop offered nationwide delivery, but this was wound up in August after the delivery company used by Safeway was taken over.

The online grocery market in the UK is dominated by the country's largest conventional retailer Tesco, which last year sold 250m's worth of goods over the internet.

Tesco's online store, which offers home delivery in most parts of the UK, moved into profitability last year.

See also:

25 Oct 01 | Business
Safeway heralds 'solid' results
24 Oct 00 | Business
Safeway reports sales rise
21 Sep 00 | Business
Safeway raises petrol prices
17 Oct 01 | Business
Supermarkets cut fuel prices
25 Jun 01 | Business
Tesco targets US online market
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