Safeway Inc.'s shares dropped Monday after a Credit Suisse analyst downgraded his rating on the grocery chain, saying it may have a larger-than-expected underfunded liability tied to itspension plans that could cause its costs to rise over time.
THE SPARK: Credit Suisse analyst Edward Kelly said that his firm's analysis of Safeway's multi-employer pension plans found a $7 billion pre-tax underfunded liability.
While this doesn't pose a drain on the company's cash flow in the short-term, he said it could also cause labor costs to rise over time. Given the potential rise in costs, Kelly said Safeway's shares are not as cheap as they appear.
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