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The Wellness Play

afeway’s business was doing poorly. The supermarket chain had
just announced a 6 percent drop in its profits for the last three
months of 2011, a disappointing performance its longtime CEO
Steve Burd was struggling to explain to the dozen analysts who had
dialed in to the company’s quarterly earnings call.

One of them, Ed Kelly from the Swiss bank Credit Suisse, was gently
needling Burd for using stock buybacks to mask the bad results. By
reducing the number of shares it had outstanding, buybacks could
artificially raise a company’s earnings per share—the headline number
investors focused on—even if its actual earnings fell. It was an old trick
that astute Wall Street analysts versed in corporate sleights of hand
saw right through.

Piqued, Burd said he disagreed. He was confident that Safeway’s
fortunes were about to improve, which would make purchasing its own
shares a smart investment. To justify his optimism, he cited three
initiatives the company was pursuing. The first two were shrugged off
as old news by his hard-to-please audience, but the analysts’ ears
pricked up when he got to the third.

“We’re contemplating a significant...huh—I’m just going to call it a
wellness play,” he said cryptically.

It was the first time Burd had made any public mention of this. He
didn’t elaborate, but the message the analysts took away was that the
stodgy, ninety-seven-year-old grocery chain had a secret plan to jump-
start its stagnating business. Inside Safeway, this secret plan was code-