Acquisitions help lift
Safeway earnings 15%Shares, though, fall nearly 10 percent
By Shade Elam
on NYSE-leading volume
Bloomberg NewsPLEASANTON, Calif. -- Safeway Inc., one of the largest U.S. supermarket chains, said fiscal third-quarter profit rose 15 percent after sales got a boost from its recent acquisitions.
The company's sales at stores open at least a year rose just 1 percent.
Shares of Safeway tumbled
$4.19, or 9.9 percent, to $38.06 today on the New York Stock Exchange, and earlier fell as low as $36.31. It was the most actively traded issue on the NYSE with more than 18 million shares changing hands.
Chief Executive Steven Burd has been snapping up grocery chains in the face of rising competition from Wal-Mart Stores Inc. and other general-merchandise retailers that are selling more food. While the acquisitions helped boost total sales by 16 percent, Safeway's older stores failed to attract customers.
Net income for the quarter ended Sept. 11 rose to $223.4 million, or 44 cents a share, from $193.7 million, or 38 cents, a year earlier. The results matched the average estimate of analysts surveyed by First Call Corp. Revenue rose 16 percent to $6.48 billion from $5.59 billion a year earlier.
Safeway, based in Pleasanton, California, operates 1,649 stores in the U.S. and Canada. The retailer is building its 19th Hawaii store at the Piilani Shopping Center in Kihei, Maui. So far this year, Safeway has spent about $792 million on capital expenditures, including the opening of 32 stores and the closing of 29 stores.
The grocer expects to spend a total of $1.3 billion this year on about 65 new stores and the remodeling of 250 locations. Next year, it plans to spend about $1.5 billion, open 70 to 75 new stores and remodel 250 locations.
Safeway is trying to use its larger size to negotiate tougher terms with suppliers and cut inventory and distribution costs. Earlier this month, it completed its purchase of the 117-store Randall's Food Markets Inc. of Texas.
Safeway bought Chicago-area Dominick's Supermarkets Inc. for $1.85 billion in November, Carr-Gottstein Foods Co. in Alaska for $330 million in April and California's Vons chain in April 1997 for $2.55 billion. In terms of revenue, Safeway trails rivals Kroger Co. and Albertson's Inc., both of which completed big acquisitions this year. Kroger bought Fred Meyer Inc. for $13.5 billion, while Albertson's added American Stores Co. for $12.9 billion.
