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Reduced consumer spending, lower fuel prices and a late Easter holiday created a perfect storm that drove Pleasanton, Calif.-based Safeway’s first-quarter profit to fall 25 percent and led to its decision to lower its full-year outlook.
“As anticipated, our earnings this quarter were negatively impacted by the shift in holiday sales, a decline in the Canadian currency exchange rate, a decline in fuel margins, and higher pension expense,” said Steve Burd, chairman, president, and CEO, during yesterday’s earnings conference call.
Total sales declined 7.6 percent to $9.2 billion in the first quarter of 2009, compared with $10 billion last year. Identical-store sales for the quarter, excluding fuel, declined 0.7 percent. After excluding the weeks affected by the shift in Easter holiday sales, identical-store sales, excluding fuel, increased to an estimated 0.2 percent.
Safeway's profit fell to $144.2 million, or 34 cents per share for the quarter, down from $193.4 million, or 44 cents per share, last year.
The grocer did, however, increase its dividend. “We continued to make price investments to address the needs of our customers in this difficult economic environment,” said Burd. “As a result, we saw an increase in the number of sales transactions and an improving trend in market share for the quarter. Because we are confident in the underlying strength of the business and our cash flow, we are increasing our quarterly dividend by 21 percent and repurchasing company stock.”
During the quarter, Safeway invested $243.5 million in capital expenditures, opening one new Lifestyle store, completing 10 Lifestyle remodels and closing three stores. It has reduced planned capital expenditures in 2009 from $1.2 billion to approximately $1 billion and now plans to open approximately 10 new Lifestyle stores and complete approximately 100 Lifestyle remodels.
Safeway lowered earnings guidance for the year 2009 to $2.10 to $2.30 per share and identical-store sales guidance, excluding fuel, to 0.5 percent to 1.5 percent.
Safeway operates 1,737 stores in the United States and Canada.