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Safeway lowers earnings forecast


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POSTED: Friday, July 24, 2009

PORTLAND, Ore. » Budget-conscious shoppers and falling fuel and commodity prices took a toll on Safeway Inc. during its second quarter, and the grocery chain, which doesn't expect the picture to improve soon, lowered its earnings forecast for the full year yesterday.

Safeway, which has 19 stores in the state and an additional store planned for Hilo in 2011, reported that it earned $238.6 million, or 57 cents a share, for the second quarter, up from $234.3 million, or 53 cents a share, last year.

The slight profit improvement was largely due to a $57.8 million, or 14 cents a share, benefit from the resolution of a tax matter.

Total sales declined 6.5 percent to $9.5 billion, including the impact of lower fuel sales.

Safeway CEO Steve Burd said the company saw a major downshift in consumer behavior early in the quarter, with shoppers trading down to less expensive products. That trend forced Safeway to lower retail prices.

“;We were never predicting the economy would recover in 2009, but weren't expecting another drop,”; Burd said.

Analysts expected the company to earn 56 cents per share on revenue of $9.7 billion. Analyst estimates typically exclude one-time items.

While Safeway already was lowering prices to be more competitive, those efforts will take time to gain traction with shoppers, the company said. Safeway expects sales to remain soft the rest of the year and lowered its earnings guidance.

The company now expects to earn $1.70 to $1.90 per share for the year, down from a previous estimate of $2.10 to $2.30.