Safeway profit falls 33% on deflationary pressure


POSTED: Friday, April 30, 2010

NEW YORK » Safeway Inc., which has stores throughout Hawaii, reported a 33 percent decline in first-quarter profit as it struggled with deflation in key items and competition from rivals that is squeezing sales.

But the CEO told investors he is seeing signs of an economic rebound with its customers throwing more items in their cart and trading up to more expensive products.

“;I think we're seeing a bit of recovery in the U.S. economy, and I think I believe it's slow,”; Steve Burd, chairman, president and CEO, told investors during a conference call following the earnings release. He added, however, that given stubbornly high unemployment, he doesn't see spending returning to normal until probably 2011.

Burd noted that even though the chain had seen cost increases in some key items like eggs and milk, Safeway hasn't been able to pass along all of these increases because of the economy.

However, he expects deflationary pressures to ease, helping to boost profits during the year.


The grocery chain, based in Pleasanton, Calif., said yesterday that it earned $96 million, or 25 cents per share, in the quarter. That compares with $144.2 million, or 34 cents per share, in the same period last year.

Revenue rose to $9.33 billion, up from $9.23 billion a year ago. The increase was the result of a higher Canadian exchange rate and higher fuel sales, partly offset by a 3.1 percent decline in sales at stores opened at least a year, excluding fuel.

Analysts surveyed by Thomson Reuters expected a profit of 29 cents per share on revenue of $9.24 billion.

The company backed its earnings guidance for 2010 of $1.65 to $1.85 per share. Analysts expect $1.80 per share for the fiscal year.