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    Safeway Sales Drop After Sale of Canada Ops

    Company has lowered its earnings expectations for the year

    While sales of its Canadian operations may have helped boost profits, Safeway Inc. sales dropped for the second consecutive quarter, declining 1.6 percent to $8.7 billion for the second quarter of 2013 from $8.8 billion last year, primarily due to lower fuel sales in 2013 and the disposition of Genuardi's stores in 2012.

    Identical-store sales increased 1.2 percent for the quarter. "We are pleased with the significant milestones we achieved this quarter," said Robert Edwards, president and CEO. "The substantial cash proceeds we expect to receive from the sale of our Canadian operations combined with the completion of the Blackhawk IPO will allow us to broadly enhance stakeholder value. At the same time, our continuing U.S. operations demonstrated strong year over year earnings growth in the second quarter, and we continue to gain share in our U.S. markets with a 20 basis-point improvement in the supermarket channel and a two basis-point improvement in the all outlet channel."

    Net income for the second quarter of 2013 was $8.4 million. After adjusting for the items in continuing and discontinued operations in Canada, net income was $125.1 million for the quarter. This compares to net income of $122.7 million last year.

    In June 2013, Safeway Inc. entered into an agreement to sell its Canadian operations through a sale of substantially all the net assets of Canada Safeway Limited (CSL) to Sobeys Inc., a Canadian food retailer and wholly owned subsidiary of Empire Company Limited.

    Year-to-date sales and other revenue declined 0.8 percent to $17.2 billion from $17.3 billion in the first 24 weeks of 2012, primarily due to lower fuel sales in 2013 and the disposition of Genuardi's stores in 2012, partly offset by an identical-store sales increase of 1.5 percent. Income from continuing operations increased to $113 million compared to $77.8 million.

    On April 24, 2013, Blackhawk, a Safeway subsidiary, completed its initial public offering of 11.5 million shares of its Class A common stock at $23 per share. As part of the IPO, Safeway sold 11.3 million shares of Class A common stock of Blackhawk for $237.9 million, reducing Safeway's ownership from approximately 95 percent to approximately 73 percent of Blackhawk's total outstanding shares of common stock.

    Safeway invested $125.4 million in capital expenditures in the second quarter of 2013 compared to $203.7 million in the second quarter of 2012. The grocery chain adjusted its guidance downward to the lower end of its previously provided guidance of $2.25 to $2.45.

    Pleasanton, Calif.-based Safeway operates 1,412 stores in the United States.

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