Safeway earnings jump 29%
By Deborah Cohen
Bloomberg NewsPLEASANTON, Calif. -- Safeway Inc., the second-biggest U.S. supermarket chain, said today that fiscal third-quarter profit rose 29 percent as it boosted sales and trimmed expenses.
Net income rose to $193.7 million, or 38 cents a diluted share, from $150 million, or 30 cents, before a charge in the year-earlier period.
The results beat by a penny the average estimate of analysts polled by First Call Corp. for the quarter ended Sept. 12.
Safeway is continuing to benefit from improved efficiencies and lower costs following its $2.6 billion purchase of Vons Cos. at the beginning of the second quarter of 1997. Sales at supermarkets open at least a year rose 4.8 percent.
The company has "a good balance between sales growth and margin expansion," said Charles Cerankosky, a McDonald & Co. Investments analyst with a "buy-2" rating on Safeway shares.
Its shares fell $1.63 to $44.50 in New York Stock Exchange trading of 1,812,500, more than the three-month daily average of 1.5 million.
Revenue rose 4.1 percent to $5.59 billion from $5.37 billion.
Pleasanton, Calif.-based Safeway operates 1,381 food and drug stores in the U.S. and Canada, trailing only Kroger Co. in revenue.
In Hawaii, the company has 18 stores.
The company said it expects to spend about $1 billion this year as it remodels 200 stores and adds another 40 locations. It expects to spend more than $1 billion next year to add 45 to 50 stores and remodel another 200 supermarkets.
Since the beginning of the year, Safeway has added 18 stores and closed five at a cost of about $538 million.
Reduced costs pushed down operating and administrative expenses to 22.8 percent of sales from 23 percent last year.
In the year-earlier quarter, a charge of $59.9 million, or 12 cents a share, to repay debt resulted in net income of $90.1 million, or 18 cents.
