4Q profit climbs for Dominick's parent Safeway on cost control efforts
PORTLAND, Ore. -- Safeway Inc. said Thursday that cost-cutting and an extra week in the quarter helped its profit grow 12 percent in the fourth quarter, but the results missed Wall Street expectations and its shares fell in afternoon trading.
Despite the profit gain, Pleasanton, Calif.-based Safeway, which is one of the nation's largest grocery chains, continues to struggle with sluggish traffic and sales in the deepening recession.
"We're very pleased with our earnings growth, both for the fourth quarter and for the full year, in what was a tough economic climate," Steve Burd, Safeway's president said, although he expressed disappointment in its sales.
Safeway said its profit grew to $338 million, or 79 cents per share, for the quarter ended Jan. 3, up from $301.1 million, or 68 cents per share, a year earlier. Revenue grew 3 percent to $13.82 billion.
Adjusted to exclude several one-time items, such as costs tied to Hurricane Ike and a reduction of tax reserves, the quarterly earnings amounted to 80 cents per share.
Analysts polled by Thomson Reuters expected the company to earn 81 cents per share on revenue of $14.3 billion; analyst estimates typically exclude one-time items.
Safeway has been aggressively cutting its costs, lowering prices and focusing on improving its financial position now that shoppers are more keenly focused on how and where they spend their money.
The grocer said sales of its in-house brands are soaring and some costs for goods are moderating. But traffic slowed at its stores and Safeway ceded some market share during the quarter.
Comparable-store sales declined 1.2 percent largely because fuel prices fell. Excluding fuel, comparable-store sales increase 0.5 percent. Still, management remained optimistic.
"I say this is a great time to be in the food business," Burd told investors in a conference call. "Because, while not insulated from this (bad economy and low consumer confidence) you would be hard-pressed to find people that can report the kind of earnings increases that we generate in our business."
Safeway's management said its improved cash position, continued focus on cost cutting and better pricing of products should strengthen business moving forward.
The company maintained a 2009 profit outlook of $2.34 to $2.44 per share. That's above the analyst consensus of $2.31 per share.
For the year, net income increased 9 percent to $965.3 million, or $2.21 per share, from $888.4 million, or $1.99 per share, in the prior year. Sales for the year grew to $44.1 billion from $42.29 billion.
Investors were not as optimistic as Safeway's management. Shares of Safeway fell $2.75, or 13 percent, to close at $18.37 Thursday. Its 52-week low is $17.19, which it hit in November.